DIE ERSTE österreichische Spar-Casse ... - ERSTE Stiftung
DIE ERSTE österreichische Spar-Casse ... - ERSTE Stiftung
DIE ERSTE österreichische Spar-Casse ... - ERSTE Stiftung
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<strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong><br />
Privatstiftung<br />
Programme for the Issuance of Notes<br />
On 6 December 2010, <strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung (the "<strong>ERSTE</strong> Foundation" or the "Issuer")<br />
has established a programme for the issuance of notes (the "Programme"). The Programme has been subsequently<br />
amended and updated on 6 December 2011.<br />
Under the Programme, the Issuer, subject to compliance with all relevant laws, regulations and directives, may from<br />
time to time issue senior bearer securities all different types, including fixed interest rate notes, floating rate notes and<br />
zero coupon notes (the "Notes"). The Notes issued under the Programme are governed by Austrian law.<br />
Any Notes (as defined below) under the Programme are issued subject to the provisions set out on page 34 under the<br />
section "Terms and Conditions of the Notes" (the "Terms and Conditions") together with the additional conditions set<br />
out in the relevant "Final Terms" (the "Final Terms") (together with the Terms and Conditions, the "Terms and<br />
Conditions of the Notes"). The Terms and Conditions will be supplemented by the Final Terms. A form of the Final<br />
Terms, which are a document within the meaning of Article 26 No 5 of Commission Regulation (EC) 809/2004 of 29<br />
April 2004 (the "Prospectus Regulation"), is contained in this Prospectus on page 42. The Final Terms contain specific<br />
information relating to the relevant issuance of Notes, including the specific name, the nominal amount and type of the<br />
Notes, the issue prices, the interest rates and specific other provisions in connection with the terms, the offer and the<br />
sale of the Notes. For ease of reference, a consolidated version of the Terms and Conditions of the Notes will be<br />
attached to the Final Terms, which is applicable for each Series (as defined below) of Notes. The Final Terms applicable<br />
to a Series of Notes (as defined below) will be attached to, or referred to in, the global note representing the Notes.<br />
This Prospectus has been approved by the Commission de Surveillance du Secteur Financier ("CSSF") of the Grand-<br />
Duchy of Luxembourg ("Luxembourg") in its capacity as competent authority under the Luxembourg Act on Securities<br />
Prospectuses (loi relative aux prospectus pour valeurs mobilières) (the "Luxembourg Act") for approval of this<br />
Prospectus. The Issuer has requested the CSSF to provide the competent authorities in other host Member States<br />
within the European Economic Area including the Czech Republic and the Slovak Republic with a certificate of approval<br />
attesting that this Prospectus has been drawn up in accordance with Article 5.4 of Directive 2003/71/EC of the European<br />
Parliament and the Council of 4 November 2003, as amended (which includes the amendments made by the Directive<br />
2010/73/EU (the "2010 PD Amending Directive") to the extent implemented in the relevant Member State) (the<br />
"Prospectus Directive") and relevant implementing legislation in Luxembourg. This Prospectus comprises a base<br />
prospectus for the purposes of Article 5.4 of the Prospectus Directive and relevant implementing legislation in<br />
Luxembourg. The Issuer may from time to time request the CSSF to provide the competent authorities of Member<br />
States of the European Economic Area with further notifications concerning the approval of this Prospectus. Public<br />
offers of the Notes may be made in Luxembourg, the Czech Republic and the Slovak Republic or any other Member<br />
States of the European Economic Area into which the Prospectus has been passported.<br />
According to article 7.7 of the Luxembourg Law on prospectuses for securities the CSSF assumes no responsibility as<br />
to the economic and financial soundness of the transaction and the quality or solvency of the Issuer.<br />
Each Series (as defined herein) of Notes in bearer form will be represented by a global note in bearer form (each a<br />
"Global Note") without interest coupons which bear the signatures of two persons authorised by the Issuer.<br />
Global Notes representing the Notes may (or in case of Notes listed on the Vienna Stock Exchange will) be deposited<br />
on the issue date with Oesterreichische Kontrollbank Aktiengesellschaft ("OeKB") at Am Hof 4, A-1010 Vienna, Austria,<br />
(and if so deposited may be settled through Euroclear and Clearstream, Luxembourg) or with a depositary on behalf of<br />
OeKB or with or on behalf of the Issuer and/or any other agreed depository for any other clearing system, if any, all as<br />
specified in the Final Terms until all obligations of the Issuer under the Notes have been satisfied.<br />
Prospective investors should be aware that an investment in the Notes involves risks and that, if certain risks,<br />
in particular those described in the chapter "Risk Factors" materialise, the investors may lose all or a very<br />
substantial part of their investment. A prospective investor should conduct its own thorough analysis<br />
(including its own economical, legal and tax analysis) prior to deciding whether to invest in the Notes as any<br />
evaluation of the suitability for an investor of an investment in the Notes depends upon a prospective investor's<br />
particular financial and other circumstances.<br />
This Prospectus does not constitute an offer of, or an invitation by or on behalf of any of the Issuer to subscribe for, or<br />
purchase, any Notes in certain jurisdictions in which such offer or invitation is not permitted. The Notes have not been<br />
and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act").<br />
The date of this Prospectus is 6 December 2011<br />
Arranger and Dealer<br />
Erste Group Bank AG
RESPONSIBILITY STATEMENT<br />
The Issuer with its registered office at Friedrichstraße 10, A-1010 Vienna, Austria, registered<br />
in the Commercial Register under number FN 72984 f, is solely responsible for the<br />
information given in this Prospectus. The Issuer hereby declares that, having taken all<br />
reasonable care to ensure that such is the case, the information contained in this Prospectus<br />
is, to the best of the knowledge of the Issuer, in accordance with the facts and contains no<br />
omission likely to affect its import.<br />
NOTICE<br />
This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any<br />
securities other than the Notes offered hereby and does not constitute an offer to sell or a<br />
solicitation of an offer to buy any Bonds offered hereby to any person in any jurisdiction in<br />
which it is unlawful to make any such offer or solicitation to such person.<br />
Neither the delivery of this Prospectus nor any sale made in connection herewith shall, under<br />
any circumstances, create an implication that there has been no change in the affairs of the<br />
Issuer or its affiliated companies (together the "Group") since the date hereof or that there<br />
has been no adverse change in the financial position of the Issuer and the Group since the<br />
date hereof or that any other information supplied in connection with the Offering is correct as<br />
of any date subsequent to the date on which it is supplied or, if different, the date indicated in<br />
the document containing the same. Any material new circumstances or any material<br />
incorrectness or inaccuracy as to the statements contained in the Prospectus that could<br />
influence the assessment of the Notes issued under the Prospectus and that occur or are<br />
determined between the approval of the Prospectus by the CSSF and the final end of the<br />
public offer, or if earlier, the admission to trading on a regulated market of Notes under the<br />
Prospectus will be included and published in a supplement to the Prospectus in accordance<br />
with the Prospectus Directive and relevant implementing legislation in Luxembourg.<br />
This Prospectus has been prepared by the Issuer solely for the purpose of enabling<br />
prospective investors to consider the purchase of the Notes. The information contained in this<br />
Prospectus has been provided by the Issuer and other sources identified herein.<br />
Reproduction and distribution of this Prospectus or disclosure or use of the information<br />
contained herein for any purpose other than considering an investment in the Notes is<br />
prohibited. No person has been authorised to give any information or to make any<br />
representation not contained in this Prospectus in connection with the offer, the subscription<br />
or the sale of the Notes and, if given or made, any such information or representation should<br />
not be relied upon as having been authorised by the Issuer. Such information or<br />
representations in connection with the offer, the subscription or the sale of Notes not<br />
contained in the Prospectus are invalid.<br />
The contents of this Prospectus are not to be construed as legal, business or tax advice.<br />
Each prospective investor should consult its own lawyer, financial adviser or tax adviser for<br />
legal, financial or tax advice. Prospective investors should conduct their own thorough<br />
analysis of economical, legal and tax and other consequences of the risks connected to an<br />
investment in the Notes.<br />
This Prospectus has been drawn up in accordance with Annexes IV, V and XIII of the<br />
Prospectus Directive. This Prospectus has been approved by the CSSF.<br />
The Notes have not been and will not be registered under the Securities Act nor by any<br />
authority of a State in the U.S. or according to the applicable securities regulations in<br />
Australia, Canada, Japan or United Kingdom and may not be offered, sold or delivered within<br />
the U.S. or, for the account and benefit of U.S. persons or any other persons in Australia,<br />
Canada, Japan or the United Kingdom.<br />
Page 2
In this Prospectus, unless otherwise specified or the context otherwise requires, references to<br />
€, euro or EUR are to the currency introduced at the start of the third stage of European<br />
Economic and Monetary Union pursuant to the Treaty establishing the European Community<br />
(as amended from time to time), references to CZK are to Czech Koruna, SKK are to Slovak<br />
Krona and references to "US dollars" and US$ are to the currency of the United States of<br />
America.<br />
Page 3
TABLE OF CONTENTS<br />
RESPONSIBILITY STATEMENT ............................................................................................... 2<br />
NOTICE ...................................................................................................................................... 2<br />
TABLE OF CONTENTS ............................................................................................................. 4<br />
FORWARD-LOOKING STATEMENTS ...................................................................................... 6<br />
DOCUMENTS INCORPORATED BY REFERENCE ................................................................. 7<br />
SUPPLEMENT TO THE PROSPECTUS ................................................................................... 8<br />
SOURCES OF INFORMATION .................................................................................................. 8<br />
SUMMARY OF THE PROGRAMME .......................................................................................... 9<br />
THE NOTES ............................................................................................................................ 9<br />
RISK FACTORS RELATING TO THE ISSUER .............................................................................. 14<br />
RISK FACTORS ARISING FROM <strong>ERSTE</strong> GROUP'S BUSINESS OPERATIONS .................................. 15<br />
RISK FACTORS ....................................................................................................................... 17<br />
RISKS FACTORS RELATING TO THE ISSUER ............................................................................. 17<br />
RISK FACTORS ARISING FROM THE <strong>ERSTE</strong> GROUP’S BUSINESS OPERATIONS ............................ 19<br />
RISKS RELATING TO THE NOTES ............................................................................................ 24<br />
GENERAL DESCRIPTION OF THE PROGRAMME ............................................................... 30<br />
TERMS AND CONDITIONS ..................................................................................................... 34<br />
FORM OF FINAL TERMS ........................................................................................................ 42<br />
<strong>DIE</strong> <strong>ERSTE</strong> ÖSTERREICHISCHE SPAR-CASSE PRIVATSTIFTUNG .................................. 47<br />
GENERAL ............................................................................................................................. 47<br />
PURPOSE AND OBJECTIVE OF <strong>ERSTE</strong> FOUNDATION .............................................................. 47<br />
BUSINESS OVERVIEW ........................................................................................................... 48<br />
ADMINISTRATIVE, MANAGING AND SUPERVISORY BO<strong>DIE</strong>S OF <strong>ERSTE</strong><br />
FOUNDATION .......................................................................................................................... 58<br />
MANAGEMENT BOARD .......................................................................................................... 58<br />
SUPERVISORY BOARD .......................................................................................................... 60<br />
SELECTED FINANCIAL INFORMATION ................................................................................ 66<br />
ADDITIONAL FINANCIAL INFORMATION .............................................................................. 70<br />
LEGAL PROCEEDINGS .......................................................................................................... 72<br />
MATERIAL CONTRACTS ........................................................................................................ 73<br />
TAXATION ................................................................................................................................ 74<br />
AUSTRIA ............................................................................................................................ 74<br />
CZECH REPUBLIC ............................................................................................................ 79<br />
LUXEMBOURG .................................................................................................................. 83<br />
SLOVAK REPUBLIC .......................................................................................................... 86<br />
OFFER AND SUBSCRIPTION ................................................................................................. 89<br />
Page 4
SELLING RESTRICTIONS ....................................................................................................... 91<br />
GENERAL INFORMATION ...................................................................................................... 92<br />
GLOSSARY AND LIST OF ABBREVIATIONS ........................................................................ 94<br />
Page 5
FORWARD-LOOKING STATEMENTS<br />
This Prospectus contains statements under the captions "Prospectus Summary", "Risk<br />
Factors" and elsewhere that are, or may be deemed to be, "forward-looking statements". In<br />
some cases, these forward-looking statements can be identified by the use of forward-looking<br />
terminology, including the words "believes", "estimates", "anticipates", "expects", "intends",<br />
"targets", "may", "will", "plans", "continue" or "should" or, in each case, their negative or other<br />
variations or comparable terminology or by discussions of strategies, plans, objectives, goals,<br />
future events or intentions. The forward-looking statements contained in this Prospectus<br />
include certain targets. These targets reflect goals that Issuer is aiming to achieve and do not<br />
constitute forecasts.<br />
The forward-looking statements contained in this Prospectus include all matters that are not<br />
historical facts and include statements regarding the Issuers' intentions, beliefs or current<br />
expectations concerning, among other things, the results of operations, financial condition,<br />
liquidity, prospects, growth, strategies and dividend policy and the industries and markets in<br />
which the Issuer operates. By their nature, forward-looking statements involve known and<br />
unknown risks and uncertainties because they relate to events, and depend on<br />
circumstances, that may or may not occur in the future. Forward-looking statements are not<br />
guarantees of future performance. Prospective investors should not place undue reliance on<br />
these forward-looking statements.<br />
Many factors could cause the actual results, performance or achievements of the Issuer to be<br />
materially different from any future results, performance or achievements that may be<br />
expressed or implied by such forward-looking statements. Some of these factors are<br />
discussed in more detail under "Risk Factors" and elsewhere.<br />
Should one or more of these risks or uncertainties occur, or should underlying assumptions<br />
prove incorrect, actual results may vary materially from those described in this Prospectus as<br />
anticipated, believed, estimated or expected. The Issuer does not intend, and does not<br />
assume any obligation, to update forward-looking statements set forth in this Prospectus after<br />
the end of the offer.<br />
Page 6
DOCUMENTS INCORPORATED BY REFERENCE<br />
This Prospectus should be read and construed in conjunction with each final terms relating to<br />
any notes that are offered under the Programme at the time of this Prospectus which have<br />
been previously filed with the CSSF, and with the following sections of the following<br />
documents, which have been previously published or will be published at the same time as<br />
this Prospectus and which are incorporated into this Prospectus by reference, forming an<br />
integral part of it:<br />
Document/Heading Page reference in the<br />
relevant document<br />
The prospectus dated 6 December 2010 related to the<br />
Programme of the Issuer<br />
Terms and Conditions<br />
Form of Final Terms<br />
English translation of the Audited Financial Statements of<br />
the Issuer for the financial year ended 31 December 2009<br />
Profit and Loss Account<br />
Balance Sheet<br />
Foundation Net Assets (<strong>Stiftung</strong>svermögen)<br />
Notes to the Financial Statements<br />
Auditors' Report<br />
English translation of the Audited Financial Statements of<br />
the Issuer for the financial year ended 31 December 2010<br />
Profit and Loss Account<br />
Balance Sheet<br />
Foundation Net Assets (<strong>Stiftung</strong>svermögen)<br />
Notes to the Financial Statements<br />
Auditors' Report<br />
English translation of the Unaudited Interim Financial<br />
Statements of the Issuer for the third quarter year ended<br />
30 September 2011<br />
Profit and Loss Account<br />
Balance Sheet<br />
Selected Notes to the Financial Statements<br />
34 - 42<br />
43 - 47<br />
6 - 7<br />
3 - 5<br />
11<br />
8 - 14<br />
15 - 16<br />
6 - 7<br />
3 - 5<br />
12<br />
8 - 15<br />
16 - 17<br />
For the avoidance of doubt, such parts of the English translations of the annual report of the<br />
Issuer for the financial years 2009 and 2010 respectively, as well as the English translation of<br />
the interim report for the third quarter year in 2011 which are not explicitly listed in the table<br />
above, are not incorporated by reference into this Prospectus. The non-incorporated parts of<br />
4<br />
1<br />
6<br />
Page 7
the documents incorporated by reference into this Prospectus are not relevant for the<br />
investor.<br />
Any information not listed above but included in the documents incorporated by reference is<br />
given for information purposes only.<br />
Such parts of the documents which are explicitly listed above shall be deemed to be<br />
incorporated in, and form part of this Prospectus, save that any statement contained in such a<br />
document shall be deemed to be modified or superseded for the purpose of this Prospectus<br />
to the extent that a statement contained in this Prospectus modifies or supersedes such<br />
earlier statement (whether expressly, by implication or otherwise). Any statement so modified<br />
or superseded shall not be deemed, except as so modified or superseded, to constitute a part<br />
of this Prospectus.<br />
The Prospectus, any supplement thereto, and the Final Terms for Notes will be published in<br />
electronic form on the website of the Issuer under "www.erstestiftung.org" and the website of<br />
the Luxembourg Stock Exchange under "www.bourse.lu", except that Final Terms will not be<br />
published on the website of the Luxembourg Stock Exchange. Printed copies of the<br />
Prospectus, any supplement thereto and the Final Terms and the documents incorporated by<br />
reference in the Prospectus will be made available free of charge at the specified office of the<br />
Issuer.<br />
The documents incorporated by reference into this Prospectus will be available on the<br />
website of the Issuer under "www.erstestiftung.org" and on the website of the Luxembourg<br />
Stock Exchange under "www.bourse.lu".<br />
SUPPLEMENT TO THE PROSPECTUS<br />
The Issuer is obliged by the provisions of the Prospectus Directive and relevant implementing<br />
legislation in Luxembourg, that if at any time during the duration of the Programme there is a<br />
significant new factor, material mistake or inaccuracy relating to information contained in this<br />
Prospectus which is capable of affecting the assessment of any Notes and which arises or is<br />
noted between the time when the Prospectus is approved and the final closing of an offer of<br />
such Notes to the public, the Issuer shall prepare a supplement to this Prospectus for use in<br />
connection with any subsequent offering of the Notes and shall supply to the CSSF such<br />
number of copies of such supplement or replacement hereto as the relevant applicable<br />
legislation require.<br />
SOURCES OF INFORMATION<br />
Unless otherwise stated, statistical and other data provided in this Prospectus has been<br />
extracted from the audited financial statements of the Issuer for the financial year ended<br />
31 December 2010 and 31 December 2009 and the unaudited interim financial statements for<br />
the third quarter year ended 30 September 2011. The Issuer confirms that such information<br />
has been accurately reproduced and that, so far as it is aware, and is able to ascertain from<br />
information published by such sources, no facts have been omitted which would render the<br />
reproduced information inaccurate or misleading. To the extent third party information is used<br />
in this Prospectus, the Issuer confirms that such information has been accurately reproduced<br />
and as far as the Issuer is aware and is able to ascertain from information published by the<br />
sources of such information, no facts have been omitted which would render the reproduced<br />
information inaccurate or misleading.<br />
Page 8
SUMMARY OF THE PROGRAMME<br />
This summary is a general summary of the main information contained in this Prospectus.<br />
This summary must be read as an introduction to this Prospectus. Any decision to invest in<br />
any Notes should be based on consideration of this Prospectus as a whole, including the<br />
documents incorporated by reference, by any investor. Any investor should consider carefully<br />
the information and risk factors contained in this Prospectus.<br />
Where a claim relating to information contained in this Prospectus is brought before a court in<br />
an EEA State, the plaintiff investor may, under the national legislation of the EEA State where<br />
the claim is brought, have to bear the costs of translating the Prospectus before the legal<br />
proceedings are initiated. Civil liability may attach to the Issuer or any other person liable in<br />
respect of this summary, including any translation thereof, but only if the summary is<br />
misleading, inaccurate or inconsistent when read together with the other parts of this<br />
Prospectus.<br />
Capitalised expressions used in this summary have the meanings given in the Terms and<br />
Conditions of the Notes and in the Final Terms as set out on page 34 et seqq (the "Terms and<br />
Conditions").<br />
The Notes<br />
Denominations of Notes<br />
Notes will be issued in such denominations as may be agreed by the Issuer and the relevant<br />
Dealer(s) and specified in the relevant Final Terms, save that the minimum denomination of<br />
the Notes will be Euro 1,000 or, if any currency other than Euro, in an amount in such other<br />
currency equal to or exceeding the equivalent of Euro 1,000 at the time of the issue of the<br />
Notes.<br />
Maturities<br />
The Notes will not have a minimum maturity.<br />
Form of Notes<br />
The Notes are bearer Notes. Each Series of Notes in bearer form will be represented by a<br />
global note in bearer form without interest coupons.<br />
The Global Notes relating to the Notes will be deposited with or on behalf of OeKB (and if so<br />
deposited may be settled through Euroclear and Clearstream, Luxembourg) or with or on<br />
behalf of the Issuer or may be held by investors until all obligations of the Issuer under the<br />
Notes have been satisfied. The Noteholders will receive co-ownership participations or rights<br />
in the Global Note that are transferable in accordance with the general business conditions<br />
and provisions of the central securities depositary and in accordance with the applicable laws.<br />
Single issues and tap issues<br />
Issues of Notes may be single issues (Einzelemissionen) where the Notes may be subscribed<br />
during a fixed subscription period, or tap issues (Daueremissionen), where Notes are<br />
available for subscription during substantially the whole (or part of the) term of the Notes at<br />
the discretion of the Issuer.<br />
Issue Price<br />
Notes may be issued at their principal amount or at a discount or premium thereto.<br />
Page 9
The issue price for Notes issued in tap issues is determined in the Final Terms at the start of<br />
their term and thereafter fixed by the Issuer continuously according to market conditions<br />
prevailing from time to time. In case of tap issues, the aggregated number of the outstanding<br />
Notes may increase from time to time upon subscriptions being made, and the Issuer will in<br />
such case specify the upper limit of the aggregate number of the Notes in the Final Terms.<br />
Interest<br />
Fixed interest will be payable in arrear on the date or dates in each year specified in the<br />
relevant Final Terms, floating rate Notes will bear interest set separately for each Series as<br />
specified in the relevant part of the Final Terms and zero coupon Notes may be issued at their<br />
principal amount or at a discount to it and will not bear interest.<br />
Redemption<br />
The Notes will be redeemed at their maturity according to the relevant Final Terms.<br />
An early redemption by the Issuer is only possible if this is set out it the Final Terms. Investors<br />
may not redeem the Notes prior to their maturity.<br />
Excluding the Noteholders' right to redeem Notes prior to their maturity is often a precondition<br />
for the Issuer being able to hedge its exposure under the Notes. Thus, without early<br />
redemption by Noteholders being excluded, the Issuer would not be able to issue Notes at all,<br />
or the Issuer would factor the potential hedging break costs into the redemption amount of the<br />
Notes, thus reducing the yield investors receive from the Notes. Investors should therefore<br />
carefully consider whether they think that a right of early redemption only for the Issuer would<br />
be to their detriment, and should, if they think that this is the case, not invest in the Notes.<br />
Governing law<br />
The Notes shall be governed by Austrian law excluding its conflict of laws rules.<br />
Use of Proceeds<br />
The net proceeds from the issue of Notes will be used by <strong>ERSTE</strong> Foundation for its general<br />
funding and refinancing purposes and to achieve its foundation aim.<br />
Risk factors relating to the Notes<br />
Each of the risks highlighted below could have a material adverse effect on the investors and<br />
on the amount of principal and interest which investors will receive in respect of the Notes. In<br />
addition, each of the risks highlighted below could adversely affect the trading price of the<br />
Notes and/or the rights of investors under the Notes and, as a result, investors could lose<br />
some or all of their investment. Prospective investors should note that the risks described<br />
below are not the only risks relating to the Notes. There may be additional risks which could<br />
adversely affect the trading price of the Notes held by the investors or the amount of principal<br />
and interest which investors receive could be less than expected.<br />
The Notes may not be a suitable investment for all investors<br />
The decision of potential investors to subscribe to the Notes should be based on an<br />
assessment of their personal circumstances and income, investment expectations, and<br />
awareness of the long-term nature of the investment. Investors should be clear about whether<br />
the Notes meet their needs. If investors do not understand the risks associated with the Notes<br />
or the terms of the Notes or are unable to assess the risk associated with them, they should<br />
seek expert advice before making an investment decision.<br />
Page 10
Credit Risk<br />
Credit risk is the risk that the Issuer may not be able to make interest or principal payments,<br />
partially or wholly, under the Notes.<br />
Credit Spread Risk<br />
Investors who are investing in the Notes assume the risk that the credit spread (which means<br />
the margin payable by the Issuer to the holder of a Note as a premium for the credit risk) of<br />
the Issuer changes.<br />
Inflation Risk<br />
Inflation risk is the risk that currency depreciation in the future may reduce the real yield of an<br />
investment.<br />
Liquidity Risk<br />
There can be no assurance that a liquid secondary market for the Notes will develop or, if it<br />
does develop, that it will continue to exist. In an illiquid market, investors may not be able to<br />
sell their Notes at fair market prices.<br />
Market Price Risk<br />
Noteholders may be exposed to a market price risk when selling the Notes. The historical<br />
price of the Notes is not an indication for future price developments of the Notes and must not<br />
used as such.<br />
Risk of Early Redemption<br />
In the event that Notes are redeemed prior to their maturity, holders of such Notes may be<br />
exposed to risks, including the risk that their investments will have a lower than expected yield<br />
(Risk of Early Redemption).<br />
Reinvestment Risk<br />
There is a risk that Noteholders may not be able to reinvest proceeds from the Notes in such<br />
a way that they receive the same rate of return.<br />
Fixed Rate Notes<br />
Holders of Fixed Rate Notes are exposed to the risk that the price of such Notes falls as a<br />
result of changes in the market interest rate.<br />
Floating Rate Notes<br />
Holders of Floating Rate Notes may be exposed to the risk of fluctuating interest rate levels<br />
and uncertain interest income. Floating Rate Notes may include multipliers or other leverage<br />
factors, or caps or floors, or any combination of such features or of features of a similar kind.<br />
The market value for Floating Rate Notes structured in such manner may be more volatile<br />
than that of Floating Rate Notes that do not have such features.<br />
Inverse/Reverse Floaters<br />
The market value of Inverse/Reverse Floating Rate Notes is more volatile than the market<br />
value of other more conventional floating rate notes based on the same reference rate.<br />
Page 11
Zero-Coupon Notes<br />
Changes in market interest rates have a substantially stronger impact on the prices of Zero<br />
Coupon Notes than on the prices of ordinary notes.<br />
Structured Notes<br />
An investment in Notes under which the premium and/or the interest and/or the redemption<br />
amount is determined by reference to one or more formula, either directly or inversely, may<br />
entail significant risks not associated with similar investments in conventional Notes. Such<br />
risks include the risks that the holder of such Notes will receive no interest at all or that the<br />
resulting interest rate will be less than that payable on a conventional debt security at the<br />
same time and/or that the holder of such Notes could lose all or a substantial portion of the<br />
redemption amount of the Notes. In addition, investors should be aware that the market price<br />
of such Notes may be very volatile. In general, structured Notes generate a specific cash flow.<br />
The Terms and Conditions for the Notes set out under which requirements, to which date and<br />
to which amount the interest or/and redemption amounts are/will be payable. If the agreed<br />
conditions do not occur, the real cash flow may substantially differ from the expected cash<br />
flow.<br />
Risks relating to Caps<br />
In the case of a cap, a Noteholder will not be able to benefit from any favourable development<br />
beyond the cap.<br />
Purchase on credit - debt financing<br />
If a loan or credit is used to finance the acquisition of the Notes and the Notes subsequently<br />
go into default, or if their trading price diminishes significantly, the investor may not only incur<br />
a loss on the investment but will also have to repay the loan and interest payable thereon.<br />
Incidental costs<br />
Incidental costs associated with the purchase and sale of the Notes may have a significant<br />
impact on the potential return on the Notes.<br />
Clearing Risk<br />
Investors have to rely on the functionality of the relevant clearing system.<br />
Taxation<br />
Prospective investors should contact their own tax advisors for advice on the tax impact of an<br />
investment in the Notes which may differ from the general description of tax impacts on<br />
investors.<br />
Applicable law and changes in applicable laws or in tax legislation<br />
The Notes are governed by Austrian law, and changes in applicable laws, regulations,<br />
regulatory policies or tax legislation may have an adverse effect on the Issuer, the Notes and<br />
the investors.<br />
Page 12
Business of <strong>ERSTE</strong> Foundation<br />
<strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung ("<strong>ERSTE</strong> Foundation") is the legal<br />
successor to "Erste oesterreichische <strong>Spar</strong>-<strong>Casse</strong>" founded in 1819. Based on its assets, it is<br />
one of the largest non-profit foundations in the German-speaking region:<br />
According to the statistics compiled by the Bundesverband deutscher <strong>Stiftung</strong>en ("Die<br />
größten <strong>Stiftung</strong>en privaten Rechts nach Vermögen", 2010), <strong>ERSTE</strong> Foundation is among the<br />
ten largest foundations mentioned by the statistics measured on assets (based on the<br />
financial year 2010).<br />
<strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung is a private foundation under Austrian<br />
law and is registered in the Companies Register under FN 72984 f, Commercial Court<br />
Vienna. Its registered office is at Friedrichstrasse 10, 1010 Vienna, Austria. The phone<br />
number is +43 50 100 15100.<br />
The administrative and supervisory bodies of <strong>ERSTE</strong> Foundation comprise five members of<br />
the Management Board and eight members of the Supervisory Board.<br />
<strong>ERSTE</strong> Foundation controls currently 25.63% of the ordinary shares of Erste Group Bank AG<br />
("Erste Group Bank") and is therefore the largest principal shareholder of Erste Group Bank.<br />
In its enlarged home market in Central and Eastern Europe, Czech Republic, Romania,<br />
Slovak Republic, Hungary, Croatia, Serbia and the Ukraine, Erste Group Bank and its<br />
subsidiaries and investment companies in their entirety (together the "Erste Group") is one of<br />
the leading banking groups in the retail business. As of 30 September 2011, Erste Group had<br />
around 17.2 million customers and total assets of EUR 216.1 billion on a consolidated basis.<br />
As of 30 September 2011, Erste Group employed 50,901 persons with a network of more<br />
than 3,200 branch offices worldwide.<br />
A share of the income earned on the equity investments of <strong>ERSTE</strong> Foundation is invested in<br />
the non-profit projects developed by <strong>ERSTE</strong> Foundation and its partners. The objective of<br />
<strong>ERSTE</strong> Foundation is to establish its three main areas of focus – social development, culture<br />
and Europe – by carrying out large, sustainable projects in Central and Southeast Europe as<br />
well as to enlarge its scope of action. In the limelight are initiatives and projects that (i) help to<br />
improve the quality how people live together in the region, (ii) promote a conception of cultural<br />
openness, and projects that (iii) aim to reinforce the European unification process in the<br />
region. In 2009, some EUR 6.0 million were approved for a total of 125 projects. In 2010,<br />
some EUR 5.8 million were approved for a total of 167 projects.<br />
The total assets of <strong>ERSTE</strong> Foundation as of 31 December 2010 were EUR 1,713 million,<br />
which was EUR 200 million higher than the previous year. The foundation net assets<br />
(<strong>Stiftung</strong>svermögen) of <strong>ERSTE</strong> Foundation amounted to EUR 282,931,679.16 (excluding<br />
hidden reserves) as of 31 December 2010.<br />
As of 31 December 2009, <strong>ERSTE</strong> Foundation had 26 employees and as of 31 December<br />
2010, the figure rose to 29 employees.<br />
Financial Information<br />
The source of the financial information given below is the audited annual financial statements<br />
of <strong>ERSTE</strong> Foundation for the financial years ending on 31 December 2010 and 31 December<br />
2009.<br />
Page 13
2010 2009<br />
In € millions<br />
(rounded)<br />
Total assets 1,713 1,513<br />
Net interest income -54 -49<br />
Profit for the year before taxes 17 9<br />
Profit for the year (after taxes) 16 9<br />
Foundation net assets (capital and revenue reserves) 283 273<br />
Risk Factors relating to the Issuer<br />
The Issuer may be exposed to the following risks which must be carefully considered together<br />
with the other information in this prospectus before reaching an investment decision.<br />
Prospective investors should bear in mind that the risks described below are not the only risks<br />
that the Issuer may be exposed to. Below the Issuer describes only the risks in connection<br />
with the business, revenue and financial position of the Issuer and its future prospects of<br />
which it is currently aware and that are considered to be material. There may be additional<br />
risks that the Issuer currently considers not to be material or of which it is not currently aware,<br />
and any of these risks could have the effects described above.<br />
� Market risks may result in an impairment of the assets of the Issuer and have a<br />
negative influence on the business, revenue position and financial position of the<br />
Issuer (Market Risk)<br />
� The Issuer’s income depends on the dividends distributed by Erste Group Bank<br />
� There is a risk that the Issuer may not have the funds it needs to fulfil its payment<br />
obligations to a sufficient extent or that it can only obtain these funds at less<br />
favourable conditions (Liquidity Risk)<br />
� The Issuer is subject to the risk of changes in prevailing interest rates (Interest Rate<br />
Risk)<br />
� The Issuer is exposed to the risk that existing liabilities may not be covered upon<br />
maturity or may not be refinanced<br />
� Payment default, discontinued payments or credit downgrades of the Issuer‘s<br />
counterparties may result in losses (Default Risk)<br />
� The loss of key personnel may have a materially adverse effect on the business<br />
activities of the Issuer<br />
� Changes in legal and taxation conditions may have a negative effect on the Issuer<br />
� In the development and execution of its projects, the Issuer is dependent on<br />
cooperation partners<br />
Page 14
Risk Factors arising from Erste Group's business operations<br />
The Issuer is the principal shareholder of Erste Group Bank and controls a stake of 25.63% of<br />
the share capital. The Issuer's business and a major portion of its interest payments from<br />
loans taken out and interest rate derivatives are financed by the dividend income from the<br />
shares in Erste Group Bank. The Issuer is exposed to the risks of a shareholder with respect<br />
to Erste Group Bank. Therefore, <strong>ERSTE</strong> Foundation has a high exposure to the risks of the<br />
business operations of Erste Group Bank (and its consolidated affiliates, together the “Erste<br />
Group” or the "Group"). In particular, the risk factors mentioned below in connection with<br />
Erste Group may, if they materialize, have materially adverse effects on the liquidity,<br />
business, revenue position and financial position of the Issuer and may result in a worst case<br />
scenario in the total loss of the capital invested under the Notes.<br />
� The recent global financial and economic crisis and the current sovereign debt crisis<br />
have had and may continue to have a material adverse effect on the Erste Group and<br />
its markets<br />
� As a consequence of the recent financial crisis and economic downturn, the Erste<br />
Group is experiencing a deterioration in credit quality<br />
� Market risks may result in an impairment of the assets of the Erste Group and have a<br />
negative effect on the business, results of operations and financial position (Market<br />
Risk)<br />
� The members of the Erste Group are exposed to substantial counterparty default risk<br />
and credit risk. The development of operating performance of the Erste Group, credit<br />
default rates, write-downs and impairment losses may have a negative effect on the<br />
development of its results (Credit Risk)<br />
� Interest rate fluctuations may adversely affect the results of the Erste Group<br />
� As a large part of the activities, assets and customers of the Erste Group are<br />
concentrated in countries in Central and Eastern Europe that are not part of the Euro-<br />
Zone, the Erste Group is exposed to currency risk<br />
� The members of the Erste Group are subject to liquidity risk<br />
� The members of the Erste Group in CEE are subject to the higher political and<br />
economic risks related to the respective countries<br />
� Changes in existing or new laws (including tax laws) and/or regulations and/or<br />
accounting standards in the countries in which the Erste Group operates may have a<br />
material impact on its results of operations<br />
� The Erste Group is exposed to various operating risks especially the risk of default or<br />
of a malfunction of its IT systems<br />
� Competition is fierce in the countries in which the Erste Group operates and it may<br />
become even fiercer in the future<br />
� There is a risk that a rating agency may suspend, downgrade or withdraw the rating<br />
of Erste Group Bank and that such action might negatively affect the market value<br />
and the price of the Notes<br />
� The risk management strategies and procedures of the Erste Group may expose it to<br />
unidentified or unexpected risks<br />
Page 15
� The Erste Group may be required to provide financial support to troubled banks within<br />
the cross-guarantee system (Haftungsverbund) or to other banks and which could<br />
result in significant costs and a diversion of resources from other activities<br />
� The Erste Group could be required to make further write-downs on its balance sheet<br />
in the carrying value of goodwill and related assets resulting from previous<br />
acquisitions<br />
� Agreements with the Republic of Austria may negatively affect the business of Erste<br />
Group Bank and Erste Bank der oesterreichischen <strong>Spar</strong>kassen AG<br />
� The loss of key staff may have a material adverse effect on the business of the Erste<br />
Group<br />
Details on the risk factors are given as of page 17.<br />
Page 16
RISK FACTORS<br />
Prospective investors should carefully consider the risks set forth below and the other<br />
information contained in this Prospectus prior to making any investment decision with respect<br />
to the Notes. Each of the risks highlighted below could have a material adverse effect on the<br />
Issuer’s and the Group’s business, results of operations and financial position or prospects<br />
which, in turn, could have a material adverse effect on the amount of principal and interest<br />
which investors will receive in respect of the Notes. In addition, each of the risks highlighted<br />
below could adversely affect the trading price of the Notes or the rights of investors under the<br />
Notes and, as a result, investors could lose some or all of their investment.<br />
Prospective investors should note that the risks described below are not the only risks that the<br />
Issuer and its Group are exposed to. The Issuer describes in this chapter only those risks<br />
relating to the Issuer’s and its Group’s business, results of operations and financial position or<br />
prospects of which it is currently aware and which it considers to be material. There may be<br />
additional risks of which the Issuer is currently not aware or which it currently does not<br />
consider to be material, and any of these risks could have the effects set forth above.<br />
Before taking the decision to invest in Notes, prospective investors should carry out their own<br />
careful analysis, including specifically their own financial, legal and tax analysis, as the<br />
assessment of whether an investment in Notes is suitable for prospective investors depends<br />
on their financial and general situation as well as on the terms of the Notes concerned.<br />
Investors who have inadequate experience in financial, business and investment matters and<br />
are therefore unable to take such a decision should seek expert advice from their financial<br />
advisors before taking any decision regarding the suitability of an investment in the Notes.<br />
Unless otherwise indicated in this chapter, all references to the Issuer are also references to<br />
other entities of the Group as well as to the Group in its entirety.<br />
Risks Factors relating to the Issuer<br />
Market risks may lead to a deterioration of the Issuer’s assets and could adversely<br />
affect its business, it financial position, and its results of operations (Market Risk)<br />
Fluctuations in the debt and equity markets may affect the market value of the Issuer’s<br />
assets. This applies specifically to the valuation of the Issuer’s interest in Erste Group Bank.<br />
The Issuer is the principal shareholder of Erste Group Bank and the shares of Erste Group<br />
Bank are the most important asset of <strong>ERSTE</strong> Foundation. Therefore, it is exposed to the risk<br />
of fluctuations in the price of Erste Group Bank's shares. Fluctuations in the price of Erste<br />
Group Bank's shares may be caused by the development of the business and the valuation of<br />
Erste Group (see detailed information about the risks to which the business operations of<br />
Erste Group are exposed, all of which may have a material influence on the trading price of<br />
Erste Group Bank shares, starting on page 19) but also by economic and political<br />
developments, volatility in national and international equity markets at large, as well as<br />
completely irrational factors.<br />
A materialisation of these risks could have a material adverse impact on the Issuer’s financial<br />
position and results of operations and, thereby, its ability to meet its payment obligations<br />
under the Notes.<br />
The Issuer’s income depends on dividends distributed by Erste Group Bank<br />
The Issuer’s most important asset is its shareholding in Erste Group Bank. The Issuer’s<br />
income depends on the ability of Erste Group Bank to pay dividends. If the Issuer does not<br />
receive any (or insufficient) dividend income from its holding in Erste Group Bank over a<br />
longer period of time, this would have material adverse effects on its business, liquidity and<br />
results of operations (for risk information about Erste Group see below, from page 19) and<br />
could, in a worst case scenario, lead to the insolvency of the Issuer.<br />
Page 17
Furthermore, if Erste Group would be required to hold more capital and/or capital of better<br />
quality (e.g. because of the implementation of Basel III or tighter capital requirements<br />
imposed by the regulator), Erste Group would be required to dispose of assets and/or to raise<br />
capital and/or to retain profits. Raising new capital could result in a dilution of the Issuer's<br />
shareholding in Erste Group Bank which could reduce the Issuer's dividend income and the<br />
value of the shares held by the Issuer (because it loses minority voting rights). If Erste Group<br />
Bank retains profits to comply with increased capital requirements, it would not distribute<br />
dividends which could materially adversely affect the Issuer. In addition, if the Issuer would<br />
not be able to participate in a capital increase of Erste Group Bank, there is a risk that the<br />
Issuer's voting rights in Erste Group Bank would drop below 15% and therefore the Issuer<br />
would have to be liquidated pursuant to the provisions of the statutes of the Issuer, unless the<br />
statutes of the Issuer would be amended accordingly.<br />
All this may adversely affect the Issuer's financial and assets position.<br />
There is a risk that the Issuer will not have sufficient funds at its disposal for meeting<br />
its payment obligations or that such funds can be procured only at less favourable<br />
terms (Liquidity Risk)<br />
The Issuer is subject to liquidity risks which may materialise in the event of a mismatch of<br />
cash inflows and outflows. Failure to adequately manage these risks may adversely affect the<br />
Issuer's ability to meet its payment obligations under the Notes issued under this programme.<br />
The Issuer will fund a material part of its interest payments under its borrowings from dividend<br />
income from its interest in Erste Group Bank. If Erste Group Bank does not distribute<br />
dividends in amounts adequate to service liabilities to third parties, this will have material<br />
adverse effects on the Issuer's business, liquidity and results of operations (for risk<br />
information about the operations of Erste Group see below, from page 19).<br />
The Issuer is exposed to the risk of interest rate changes (Interest Risk)<br />
The Issuer pays interest to its creditors. If the market interest rate rises, the amounts paid by<br />
the Issuer to its creditors rise as well. This may adversely affect the Issuer’s liquidity but also<br />
its financial and assets position.<br />
The Issuer is exposed to the risk that existing liabilities cannot be settled or refinanced<br />
at maturity<br />
The Issuer has funded the purchase of shares of Erste Group Bank by borrowings from<br />
various credit institutions. If the Issuer is unable to repay these loans (or other existing<br />
liabilities) at maturity or to refinance them by new loans, this could have material adverse<br />
effects on its operations, financial position and results of operations and on the Issuer’s ability<br />
to make payments under the Notes.<br />
Payment default, suspension of payments or deterioration in the creditworthiness of<br />
the Issuer's counterparties may lead to losses (Credit Risk)<br />
The Issuer is exposed to counterparty and credit risks. Third parties that owe the Issuer<br />
money or other assets may fail to meet their obligations towards the Issuer due to insolvency,<br />
lack of liquidity, deterioration of creditworthiness, economic downturns, operational problems<br />
or for other reasons.<br />
The loss of key personnel may have a materially adverse impact on the Issuer’s<br />
operations<br />
The Issuer’s key personnel, including members of the Management Board and other<br />
members of the Issuer's top management have a material influence on the development and<br />
Page 18
implementation of the Issuer's strategies. Loss or failure to recruit and keep key personnel<br />
could have a material adverse effect on the Issuer's operations.<br />
Changes in the legal and taxation conditions may adversely affect the Issuer<br />
In Austria and in other countries in which the Issuer operates it is subject to the relevant<br />
national and international laws and treaties. Changes in existing laws and/or regulations<br />
and/or tax rules in countries in which the Issuer operates may have material adverse effects<br />
on the Issuer's business, financial position and results of operations.<br />
In the development and execution of its projects the Issuer is dependent on<br />
cooperation partners<br />
In the development and execution of its projects, the Issuer is dependent on cooperation<br />
partners. Due to this dependency there is a risk that in case of misconduct of the cooperation<br />
partners, projects cannot be implemented as planned or only with delay. This may have<br />
financially adverse effects on the Issuer and may also adversely affect the Issuer's reputation.<br />
Risk factors arising from the Erste Group’s business operations<br />
The Issuer is the Erste Group Bank’s principal shareholder and controls 25.63% of the share<br />
capital. The Issuer’s business operations and a material part of its interest payments on<br />
borrowings and interest rate derivatives is funded through dividend income from its<br />
investment in Erste Group Bank. With regard to Erste Group Bank, the Issuer is exposed to<br />
the risks of a shareholder. Therefore, <strong>ERSTE</strong> Foundation (through its shareholding in Erste<br />
Group Bank) has a substantial exposure to risks resulting from the business operations of<br />
Erste Group Bank (and its consolidated subsidiaries, together the "Erste Group”). Especially<br />
the risk factors set out below in connection with the Erste Group, in the event of their<br />
materialisation, may have considerable negative effects on the Issuer’s liquidity, business,<br />
results of operations, and financial position and may result in a worst case scenario in the<br />
total loss of the capital invested under the Notes.<br />
The recent global financial and economic crisis and the current sovereign debt crisis<br />
have had and are likely to continue to have a material adverse effect on the Erste<br />
Group and its markets<br />
Extreme volatility and the downturn in global capital and credit markets from mid-2007<br />
through the first half of the year 2009 have had a material adverse effect on the international<br />
banking sector. These conditions reduced the availability of private financing for both financial<br />
institutions and their customers, compelling many financial institutions to seek liquidity from<br />
governments and central banks. The lack of confidence in the international financial markets<br />
and worsening economic conditions have had adversely affected Erste Group's business and<br />
results of operations and may still have adverse effects on its financial condition in the future<br />
as Erste Group must expect inter alia higher default rates of borrowers.<br />
Banks are also faced with the turmoil that is caused by the European sovereign debt crises<br />
that commenced in the first half of 2010 and which is continuing and worsening. The new<br />
flare-up in the European sovereign debt crisis in 2011 might lead to further impairments and<br />
write-offs of European sovereign debt for market participants, in particular banks and other<br />
financial institutions, adversely affecting the financial position of these market participants,<br />
thereby causing market disruptions, volatility, contractions of lending, nationalisations, and in<br />
a worst case scenario, bankruptcies. All this could have a materially adverse effect on the<br />
economy as a whole, thereby seriously affecting Erste Group's business, and may also cause<br />
unexpected currency fluctuations. It is expected that the difficult conditions in the international<br />
financial markets and economic conditions in the countries where Erste Group has operations<br />
will not improve significantly in the near future. If this happens to be true, it can be expected<br />
Page 19
that Erste Group will experience a materially adverse effect on its ability to access capital and<br />
on its business, financial condition and results of operations.<br />
As a consequence of the recent financial crisis and economic downturn, the Erste<br />
Group is experiencing a deterioration in credit quality<br />
As a consequence of the recent financial crisis and the economic downturn connected by the<br />
current sovereign debt crises, the decline in consumer spending, the rise in unemployment<br />
and the loss in value of private and commercial assets in certain regions have had and will<br />
likely have in the future adverse effects on credit quality. The Erste Group is exposed to the<br />
credit risk of borrowers if they are unable to meet their obligations under the credit contracts<br />
and the collateral furnished is inadequate. As a significant portion of the Erste Group's lending<br />
to consumers outside the euro zone is in foreign currency, the Erste Group and its customers<br />
are exposed to foreign currency risks that may adversely affect its business and its operating<br />
results. Due to the currency fluctuation caused by the current sovereign debt crises, the cost<br />
of foreign-currency loans has increased substantially. As a result, the risk costs of the Erste<br />
Group for non-performing loans have risen significantly and have had an adverse effect on<br />
the financial position and the operating results of the Erste Group. In view of the uncertainty<br />
regarding the pace and scope of the economic downturn as well as the timing of a potential<br />
upturn it is very difficult to assess the extent to which credit quality will deteriorate and the<br />
number of non-performing loans will increase. Under the current economic situation the<br />
deterioration of credit quality could continue and even intensify despite the current<br />
improvement in economic conditions and the business climate if the economic recovery is not<br />
strong enough. Unforeseeable political developments or a lack of liquidity in the economies of<br />
the CEE countries may also result in credit write-downs that might exceed the maximum<br />
losses projected by risk management.<br />
All of the above mentioned factors have and in future periods may have material adverse<br />
effects on the Erste Group's operating results, financial position, and income.<br />
Market risks may result in an impairment of the assets of the Erste Group and have a<br />
negative effect on the business, results of operations and financial position (Market<br />
Risk)<br />
Fluctuations in the debt and equity markets may affect the market value and the liquidity of<br />
Erste Group Bank and of the Erste Group's assets. The value of the Erste Group’s real estate<br />
holdings is likewise subject to price fluctuations in the real estate market. Such developments<br />
may adversely affect the Erste Group's income from investment banking and securities<br />
trading and could affect its financial position and results of operations and, consequently, its<br />
ability to meet its payment obligations under the Notes. In addition, the value of collateral<br />
(such as securities, land, etc.) may decline and there is the risk that in the case of borrowers’<br />
defaults the collateral may not be sufficient to cover the losses sustained by the Erste Group.<br />
The members of the Erste Group are exposed to substantial counterparty default risk<br />
and credit risk. The development of operating performance of the Erste Group, credit<br />
default rates, write-downs and impairment losses may have a negative effect on the<br />
development of its results (Credit Risk)<br />
The Erste Group is exposed to a variety of counterparty and credit risks. Third parties that<br />
owe members of the Erste Group money, securities or other assets may not be able to<br />
perform their payment or other obligations due to insolvency, lack of liquidity, economic<br />
downturns or falls in real estate values, operational failure or for other reasons.<br />
The development of the Erste Group's operating performance, loan default levels or writedowns<br />
and impairments could adversely affect its results and may result in capital<br />
requirements that could constrain its operations, reducing the Issuer's ability to service<br />
payment obligations under the Notes and potentially adversely affecting the trading price of<br />
the Notes.<br />
Page 20
Interest rate fluctuations may adversely affect the results of the Erste Group<br />
Changes in interest rates (including changes in the difference between the levels of short-<br />
and long-term rates) may adversely affect the Erste Group's operating result and costs of<br />
funding.<br />
As a large part of the activities, assets and customers of the Erste Group are<br />
concentrated in countries in Central and Eastern Europe that are not part of the Euro-<br />
Zone, the Erste Group is exposed to currency risk<br />
A large part of the Erste Group's operations, assets and customers are located in Central and<br />
Eastern European countries that are not part of the Euro-Zone, and financial transactions in<br />
currencies other than the Euro give rise to foreign currency risks that may have material<br />
adverse effects on the Erste Group's business, results of operations and financial position or<br />
prospects and, consequently, material adverse effects on payments of principal and interest<br />
to investors under the Notes.<br />
The members of the Erste Group are subject to liquidity risk<br />
The members of the Erste Group are subject to liquidity risks which may materialise in the<br />
event of a mismatch of cash inflows and outflows. In addition, there may be the risk that the<br />
Erste Group may not or not sufficiently be able to cover its liquidity needs from outside<br />
sources, e.g. if the procurement of liquidity from the ECB is limited or made impossible by a<br />
change in the conditions governing collateral. Failure to adequate management of this<br />
liquidity risk or the lack of suitable collateral for ECB purposes could adversely affect the<br />
Erste Group’s business, financial position and revenue position.<br />
The members of the Erste Group in CEE are subject to the higher political and<br />
economic risks related to the respective countries<br />
The Erste Group has members in a number of Central and East European countries and<br />
generates a large part of its income in this region. As a result, the operations of the Erste<br />
Group are exposed to risks common to all regions undergoing rapid political, economic and<br />
social change, including currency fluctuations, exchange control restrictions, an evolving<br />
regulatory environment as well as the risk of inflation, economic recession, local market<br />
disruption, and labour unrest. Recession, deflation, hyper-inflation or similar macroeconomic<br />
events that might be triggered by the current financial and economic crisis would result in a<br />
rise in customer defaults, which would reduce the income of the Erste Group. The occurrence<br />
of one or several of such events may adversely affect the ability of the Issuer’s clients or<br />
counterparties located in the affected country or region to obtain foreign exchange or credit<br />
and, consequently, their ability to meet their payment obligations towards the members of the<br />
Erste Group. These risks could have an adverse effect on the operations of Erste Group.<br />
The biggest risk for the banking sector in the CEE region is the drying up of capital inflows<br />
from Western Europe. Those CEE countries that struggle with major external imbalances rely<br />
on these inflows in funding their current account deficits and/or their debt service. In these<br />
countries, the drying up of external funding sources could have a direct knock-on effect on<br />
domestic lending. Even those CEE countries that do not have major balance of payments<br />
imbalances are dependent on their foreign export markets. As exports have declined<br />
substantially, the real economy has suffered severe economic contraction in these countries,<br />
which has led to significantly higher unemployment and reduced consumer and corporate<br />
spending. Negative domestic sentiment and more restrictive lending policies impair<br />
investment activity and consumption. In addition, the substantial depreciation of a number of<br />
local currencies has made it more difficult for borrowers to repay loans denominated in foreign<br />
currency. At the same time, interest rates on loans extended in local currency can hardly be<br />
lowered because of poor refinancing options and depreciating local currencies.<br />
Page 21
Changes in existing or new laws (including tax laws) and/or regulations and/or<br />
accounting standards in the countries in which the Erste Group operates may have a<br />
material effect on its operating result<br />
Changes in existing laws and/or regulations and/or accounting standards, especially with<br />
regard to financial services, securities products and other transactions carried out by the<br />
Erste Group in the countries in which the Erste Group operates, may have a material effect on<br />
the operations of the Erste Group. Newly introduced tax laws (in some jurisdictions<br />
specifically designed to apply to credit institutions) may increase the tax burden of members<br />
of the Erste Group or the Erste Group as a whole, thereby affecting their profitability.<br />
Furthermore, apart from changes in the economic environment, the implementation of new<br />
regulations, such as the introduction of a new framework for capital adequacy rules –<br />
commonly known as Basel III – or changes in accounting standards and/or their application<br />
may adversely affect the Erste Group’s operations as the implementation of and compliance<br />
with such rules may result in costs that currently cannot be definitively determined. The<br />
implementation of the finalised Basel III framework could require additional capital (or capital<br />
of higher quality, thereby increasing funding costs) to be injected into the members of Erste<br />
Group, or require Erste Group to enter into business transactions that are not otherwise part<br />
of its current group strategy. They might also prevent Erste Group from continuing current<br />
lines of operations, restrict the types or volumes of transactions Erste Group may enter into,<br />
limit the payment of dividends by members of Erste Group to Erste Bank, or set limits on or<br />
require the modification of rates or fees that Erste Group charges on loans or other financial<br />
products. Erste Group may also face substantially increased compliance costs and material<br />
limitations on its ability to pursue business opportunities.<br />
Changes in laws, regulations or accounting standards and administrative practices in markets<br />
in which Erste Group operates may have an adverse effect on its financial position and results<br />
of operations.<br />
The Erste Group is exposed to various operating risks especially the risk of default or<br />
of a malfunction of its IT systems<br />
Banks and their operations rely increasingly on highly complex information technology<br />
systems ("IT systems"). IT systems are vulnerable to a number of problems, such as<br />
computer virus infection, malicious hacking, physical damage to vital IT centres as well as<br />
software or hardware malfunctions. Further operational risks derive from the inadequacy or<br />
failure of internal procedures, staff, systems, and external events. Failure to manage such<br />
risks may affect the Erste Group's financial position and results of operations.<br />
Competition is fierce in the countries in which the Erste Group operates and it may<br />
become even fiercer in the future<br />
International banks such as the members of the Erste Group are subject to sharp competition,<br />
which is expected to intensify even further in the future. Apart from local competitors,<br />
international banks may enter the banking market in Austria and Central and Eastern Europe,<br />
thus increasing the pressure on the Erste Group’s profit margins.<br />
There is a risk that a rating agency may suspend, downgrade or withdraw the rating of<br />
Erste Group Bank and that such action might negatively affect the market value and<br />
the price of the Notes<br />
A rating is a rating agency’s assessment of the credit standing of an issuer, i.e. a forecast or<br />
an indicator of potential credit losses due to insolvency, delays in payment or incomplete<br />
payments to investors. It is not a recommendation to buy, sell or hold securities. The rating<br />
agency may, in particular, suspend, downgrade or withdraw a rating. Such suspension,<br />
downgrading or withdrawal may have an adverse effect on the market value and trading price<br />
Page 22
of the Notes. A downgrading of the rating may also restrict access to funding and,<br />
consequently, increase refinancing costs.<br />
The risk management strategies and procedures of the Erste Group may expose it to<br />
unidentified or unexpected risks<br />
There is the risk that the risk management strategies and procedures employed by the Erste<br />
Group in dealing with credit risk, country risk, market risk, liquidity risk and operational risk<br />
may be inadequate or even unsuitable. Circumstances may arise that the Erste Group has<br />
not been able to factor in, foresee or assess correctly in the development of its statistical<br />
models. As a result of such circumstances, the losses of the Erste Group may exceed the<br />
maximum losses calculated under its risk management system. The Erste Group’s risk<br />
management system does not take into account all risks and market conditions. If measures<br />
used to assess and contain risks prove inadequate, this may lead to unexpected losses for<br />
the Erste Group, which will have material adverse effects on its business, financial position<br />
and results of operations.<br />
The Erste Group may be required to provide financial support to troubled banks within<br />
the cross-guarantee system (Haftungsverbund) or to other banks and which could<br />
result in significant costs and a diversion of resources from other activities<br />
The Haftungsverbund (cross-guarantee system) was established in 2002 on the basis of a set<br />
of agreements among the majority of Austrian savings banks and Erste Group Bank. The<br />
purpose of the Haftungsverbund is the development of a joint early-warning system designed<br />
to identify financial problems at savings banks being members and to provide support to<br />
troubled savings banks. As a member of the Haftungsverbund, Erste Group Bank may be<br />
forced to provide liquidity or other financial support if a member of the Haftungsverbund<br />
encounters financial problems or becomes insolvent.<br />
If a large bank or other financial institution has material liquidity problems in Austria or in CEE<br />
countries in which the Erste Group operates or if there is a risk that it may be unable to settle<br />
its liabilities or otherwise become insolvent, a government could impose on Erste Group Bank<br />
or the members of the Erste Group an obligation to provide financing or guarantees for<br />
liabilities in order to secure the continued existence of such financial institutions.<br />
Such support measures could result in significant costs and could therefore have adverse<br />
effects on Erste Group Bank. This could also result in the need for Erste Group Bank to divert<br />
its resources from other activities in a way and in a manner that could have material adverse<br />
effects on its business, financial position, and results of operations.<br />
The Erste Group could be required to make further write-downs on its balance sheet in<br />
the carrying value of goodwill and related assets resulting from previous acquisitions<br />
Goodwill is measured once a year or whenever circumstances arise that might impair<br />
goodwill. There is therefore the risk that the book value of goodwill from previous acquisitions<br />
may be reduced as a consequence of the economic downturn, slower economic growth or<br />
increased competition. A reduction of goodwill could result in write-downs of goodwill in the<br />
balance sheet of the Erste Group and would thus have adverse effects on its operating results<br />
in this period, its assets, its equity, and its ability to pay dividends.<br />
Agreements with the Republic of Austria may negatively affect the business of Erste<br />
Group Bank and Erste Bank der oesterreichischen <strong>Spar</strong>kassen AG<br />
On 26 February 2009, Erste Group Bank and Erste Bank der oesterreichische <strong>Spar</strong>kassen<br />
AG signed an agreement with the Republic of Austria under which the Republic agreed to<br />
provide tier-1 capital. Under agreements with the Republic of Austria, certain covenants and<br />
undertakings and contractual restrictions (e.g. with regard to the management, the payment of<br />
bonuses to managers, etc.) were imposed on Erste Group Bank and Erste Bank der<br />
Page 23
oesterreichischen <strong>Spar</strong>kassen AG. If Erste Group Bank and Erste Bank der oesterreichischen<br />
<strong>Spar</strong>kassen AG are unable to comply with such covenants and undertakings, the Republic of<br />
Austria is entitled to enforce compliance with the terms of the agreements by taking legal<br />
action and to levy contractual penalties. Agreements entered into with the Republic of Austria<br />
could therefore adversely affect the business of Erste Group Bank and Erste Bank der<br />
oesterreichischen <strong>Spar</strong>kassen AG.<br />
The loss of key staff may have a material adverse effect on the business of the Erste<br />
Group<br />
Erste Group’s key personnel, including members of the Management Board and other senior<br />
managers of the Erste Group members have a material influence on the development and<br />
implementation of the Erste Group's strategies. Loss or failure to recruit and keep key<br />
personnel could have a material adverse effect on Erste Group's business.<br />
Risks relating to the Notes<br />
The Notes may not be a suitable investment for all investors<br />
The decision of potential investors to subscribe to the Notes should be based on an<br />
assessment of their personal circumstances and income, investment expectations, and<br />
awareness of the long-term nature of the investment. Investors should be clear about whether<br />
the Notes meet their needs. If investors do not understand the risks associated with the Notes<br />
or the terms of the Notes or are unable to assess the risk associated with them, they should<br />
seek expert advice before making an investment decision.<br />
Prospective investors intending to invest in Notes must determine the suitability of this<br />
investment in light of their own circumstances. In particular, prospective investors should:<br />
(i) have sufficient knowledge and experience to make a meaningful evaluation of the<br />
relevant Notes, the merits and risks of investing in the relevant Notes and the information<br />
contained or incorporated by reference in this Prospectus or any applicable supplement;<br />
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the<br />
context of their personal financial situation, an investment in the relevant Notes as well as the<br />
impact such investment will have on their overall investment portfolio;<br />
(iii) have sufficient financial resources and liquidity to bear all of the risks of an<br />
investment in the relevant Notes, including where principal or interest is payable in one or<br />
several currencies, or where the currency for principal or interest payments is different from<br />
the potential investor’s currency;<br />
(iv) understand thoroughly the terms of the relevant Notes and be familiar with the<br />
behaviour of relevant indices and financial markets; and<br />
(v) be able to evaluate (either alone or with the help of a financial adviser) possible<br />
scenarios for economic trends, interest rates and other factors that may affect their<br />
investment and their ability to bear the respective risks.<br />
Some Notes are complex financial instruments which may be purchased by investors as a<br />
way to reduce risks or enhance yields by adding well understood, measured, and appropriate<br />
risks to their overall portfolios. Prospective investors should not invest in Notes that are<br />
complex financial instruments unless they have the expertise (either alone or with the help of<br />
a financial adviser) to evaluate how the Notes will perform under changing conditions, the<br />
resulting effects on the value of such Notes, and the impact such an investment may have on<br />
their overall investment portfolios.<br />
Page 24
Noteholders are exposed to the risk of partial or total failure of the Issuer to make<br />
interest and/or redemption payments under the Notes (Credit Risk)<br />
Investors are subject to the risk of a partial or total failure of the Issuer to make interest and/or<br />
redemption payments that the Issuer is obliged to make under the Notes. The worse the<br />
creditworthiness of the Issuer, the higher the risk of loss (see also the chapter on "Risk<br />
Factors relating to the Issuer" above). A materialisation of the credit risk may result in partial<br />
or total failure of the Issuer to make interest and/or redemption payments.<br />
Investors in the Notes assume the risk that the credit spread of the Issuer changes<br />
(Credit Spread Risk)<br />
A credit spread is the margin payable by the Issuer to the holder of a Note as a premium for<br />
the credit risk assumed. Credit spreads are offered and sold as premiums on current risk-free<br />
interest rates or as discounts on the price.<br />
Factors influencing the credit spreads include, among other things, the creditworthiness and<br />
rating of the Issuer, the probability of default, the recovery rate, the remaining term to maturity<br />
of the Note and obligations under collateral or guarantees or declarations as to any preferred<br />
payment or subordination. The liquidity situation, the general level of interest rates, overall<br />
economic developments, and the currency in which the relevant obligation is denominated<br />
may also have a positive or negative effect.<br />
Investors are exposed to the risk that the credit spread of the Issuer widens, which would<br />
result in a decrease in the price of the Notes.<br />
Currency depreciation (inflation) in the future may reduce the real yield of an<br />
investment<br />
Inflation risk is the possibility that the value of assets such as the Notes or income therefrom<br />
will decrease as inflation reduces the purchasing power of a currency. Inflation reduces the<br />
value of the yield. If the inflation rate exceeds the interest paid on the Notes, the yield on such<br />
Notes will become negative.<br />
There can be no assurance that a liquid secondary market for the Notes will develop<br />
or, if it does develop, that it will continue to exist. In an illiquid market, investors may<br />
not be able to sell their Notes at fair market prices (Liquidity Risk)<br />
It remains in the discretion of the Issuer, whether an application will be made for admission of<br />
the Programme and/or the Notes to regulated or unregulated markets or multilateral trading<br />
systems. Currently, such an application is not planned. Therefore, there is a higher risk that a<br />
liquid secondary market for the Notes will not develop.<br />
Even if a liquid secondary market for the Notes develops, there can be no assurance that it<br />
will continue to exist. Neither the Issuer nor Erste Group Bank (or any other member of the<br />
Erste Group) is under any obligation to take back or purchase the Notes. Even if redemption<br />
should be offered it may be discontinued at any time. In an illiquid market, investors may in<br />
certain circumstances be unable to sell their Notes at any time at fair market prices or at<br />
prices that will provide them with a yield that is comparable with similar investments for which<br />
a developed secondary market exists. This applies in particular to Notes that are especially<br />
sensitive to interest rate, currency or market risks, Notes that were designed for specific<br />
investment objectives or strategies or structured to meet the investment requirements of<br />
defined categories of investors. Such Notes would generally have a more limited secondary<br />
market and more price volatility than conventional Notes. Illiquidity may have material adverse<br />
effects on the market value of Notes. The possibility to sell the Notes might additionally be<br />
restricted by country-specific reasons.<br />
Page 25
Noteholders may be exposed to a market price risk when selling the Notes (Market<br />
Price Risk)<br />
The development of the market prices of the Notes depends on various factors, such as<br />
changes in market interest rate levels, the policies of central banks, overall economic<br />
developments, inflation rates and the lack of or excess demand for the relevant type of Note.<br />
A holder of Notes is therefore exposed to the risk of an unfavourable development of the<br />
market prices of the Notes that may materialise if holders sell the Notes prior to the final<br />
maturity of such Notes. If a holder decides to hold the Notes until their final maturity, the<br />
Notes will be redeemed at the amount set out in the relevant Final Terms.<br />
Certain Notes may contain, or be combined with, an option, the price of which may be subject<br />
to change and may thus influence the market price of such Notes. The option price (the option<br />
premium) is influenced primarily by the difference between the price of the underlying asset<br />
and the strike price, the time remaining for the option to be exercised, and the volatility of the<br />
underlying asset. Affecting the option price to a lesser degree are factors such as interest<br />
rates, market conditions, and the dividend rate of the underlying asset. Changes in the price<br />
and in the volatility of the underlying asset strongly influence the option price. The value of an<br />
option tends to decrease as its expiration date approaches and the option becomes worthless<br />
after that date. The holder of such Notes is therefore exposed to the risk of an unfavourable<br />
development of the price of the option contained in or combined with such Notes.<br />
In the event that Notes are redeemed prior to their maturity, holders of such Notes may<br />
be exposed to risks, including the risk that their investments will have a lower than<br />
expected yield (Risk of Early Redemption)<br />
The Final Terms show whether the Issuer has the right to call the Notes prior to maturity<br />
(optional call right), if any, or whether the Notes will be subject to early redemption upon the<br />
occurrence of an event specified in the Final Terms (an early redemption event). If the Issuer<br />
redeems the Notes prior to maturity or the Notes are redeemed early due to an early<br />
redemption event, the holders of such Notes are exposed to the risk that, due to early<br />
redemption, their investments will have a lower yield than expected. The Issuer may exercise<br />
its optional call right if the yield on comparable Notes in the capital markets falls, which means<br />
that the investor may be able to reinvest the redemption proceeds only at a lower yield.<br />
Investors should note that where the Terms and Conditions of the Notes provide for a right of<br />
early redemption by the Issuer only, Noteholders usually receive a higher yield on their Notes<br />
than they would if they were also granted a right to redeem the Notes early. Excluding the<br />
Noteholders' right to redeem Notes prior to their maturity (general early redemption right) is<br />
often a precondition for the Issuer being able to hedge its exposure under the Notes. Thus,<br />
without early redemption by Noteholders being excluded, the Issuer would not be able to<br />
issue Notes at all, or the Issuer would factor the potential hedging break costs into the<br />
redemption amount of the Notes, thus reducing the yield investors receive from the Notes.<br />
Investors should therefore carefully consider whether they think that a right of early<br />
redemption only for the Issuer would be to their detriment and should, if they think that this is<br />
the case, not invest in the Notes.<br />
There is a risk that Noteholders may not be able to reinvest proceeds from the Notes in<br />
such a way that they earn the same rate of return (Reinvestment Risk)<br />
Noteholders may be subject to the risk that in the event of an early redemption interest or<br />
dividends earned from an investment in the Notes cannot be reinvested in such a way that<br />
they earn the same rate of return as the redeemed Notes.<br />
Page 26
Holders of Fixed Rate Notes are exposed to the risk that the price of such Notes falls<br />
as a result of changes in the market interest rate<br />
Holders of Fixed Rate Notes are exposed to the risk that the price of such Notes may fall as a<br />
result of changes in the market interest rate. While the nominal interest rate of Fixed Rate<br />
Notes as specified in the Final Terms is fixed during the life of such Notes, the current interest<br />
rate on the capital market for issues of the same maturity typically changes on a daily basis.<br />
As the market interest rate changes, the price of Fixed Rate Notes also changes, but usually<br />
in the opposite direction. If the market interest rate increases, the price of Fixed Rate Notes<br />
typically falls until the yield of such Notes is approximately equal to the market interest rate. If<br />
the market interest rate falls, the price of Fixed Rate Notes typically increases until the yield of<br />
such Notes is approximately equal to the market interest rate.<br />
If the holder of Fixed Rate Notes holds such Notes until maturity, changes in the market<br />
interest rate are without relevance to such holder as the Notes will finally be redeemed at the<br />
specified redemption amount, which is usually the nominal amount of such Notes. The same<br />
risk applies to Step-Up Notes (with rising interest rates) and Step-Down Notes (with falling<br />
interest rates) if the market interest rates in respect of comparable Notes are higher than the<br />
rates applicable to such Notes.<br />
Holders of Floating Rate Notes may be exposed to the risk of fluctuating interest rate<br />
levels and uncertain interest income<br />
Floating Rate Notes tend to be volatile investments. A holder of Floating Rate Notes is<br />
exposed to the risk of fluctuating interest rate levels and uncertain interest income.<br />
Fluctuating interest rate levels make it impossible to determine the return of Floating Rate<br />
Notes in advance.<br />
If Floating Rate Notes are structured to include multipliers or other leverage factors, or caps<br />
or floors, or any combination of such features or of features of a similar kind, the market value<br />
may be more volatile than that of Floating Rate Notes that do not have such features. If the<br />
amount of interest payable is determined in conjunction with a multiplier greater than one or<br />
by reference to some other leverage factor, the effect of changes in interest rates on interest<br />
payable will be increased. The effect of a cap is that the amount of interest will never rise<br />
above and beyond the predetermined cap, so that the holder will not be able to benefit from<br />
any favourable development beyond the cap. The yield could therefore be considerably lower<br />
than that of similar Floating Rate Notes without a cap.<br />
The market value of Inverse/Reverse Floating Rate Notes is more volatile than the<br />
market value of other more conventional floating rate notes based on the same<br />
reference rate<br />
Inverse Floating Rate Notes (also called Reverse Floating Rate Notes) have an interest rate<br />
that is determined as the difference between a fixed interest rate and a floating reference rate<br />
such as the Euro Inter-bank Offered Rate ("EURIBOR") or the London Inter-bank Offered<br />
Rate ("LIBOR"), which means that interest income on such Notes falls if the reference interest<br />
rate increases. Typically, the market value of Inverse Floating Rate Notes is more volatile<br />
than the market value of more conventional floating rate notes based on the same reference<br />
rate (with other terms being equal). Inverse Floating Rate Notes are more volatile as an<br />
increase in the reference rate not only decreases the interest payable on the Notes, but may<br />
also reflect an increase in prevailing interest rates, which may further adversely affect the<br />
market value of such Notes.<br />
Changes in market interest rates have a substantially stronger impact on the prices of<br />
Zero Coupon Notes than on the prices of ordinary notes<br />
Page 27
Zero Coupon Notes do not pay current interest but are issued at a discount from their nominal<br />
value. Instead of periodical interest payments, the difference between the redemption price<br />
and the issue price constitutes interest income until maturity and reflects the market interest<br />
rate. A holder of Zero Coupon Notes is exposed to the risk that the price of such Notes falls<br />
as a result of changes in the market interest rate. Prices of Zero Coupon Notes are more<br />
volatile than the prices of Fixed Rate Notes and more sensitive to changes in market interest<br />
rates than interest bearing notes with a similar maturity.<br />
Structured Notes bear a special risk<br />
In general, an investment in Notes under which the premium and/or the interest and/or the<br />
redemption amount is determined by reference to one or more formulae, either directly or<br />
inversely, may entail significant risks not associated with similar investments in conventional<br />
Notes. Such risks include the risks that the holder of such Notes will receive no interest at all<br />
or that the resulting interest rate will be less than that payable on a conventional debt security<br />
at the same time and/or that the holder of such Notes could lose all or a substantial portion of<br />
the redemption amount of the Notes. In addition, investors should be aware that the market<br />
price of such Notes may be very volatile.<br />
In the case of a cap, a Noteholder will not be able to benefit from any favourable<br />
development beyond the cap<br />
If the interest rate and/or the redemption amount of an issue of Notes are not fixed but will be<br />
determined according to the structure of Notes as set out in the relevant Final Terms of the<br />
Notes, such an issue may also incorporate a cap. The effect of a cap is that the amount of<br />
interest and/or the redemption amount will never rise above the predetermined cap, so that<br />
the holder will not be able to benefit from any favourable development beyond the cap. The<br />
yield could therefore be considerably lower than that of similarly structured Notes without a<br />
cap.<br />
If a loan or credit is used to finance the acquisition of the Notes, the risk of a loss may<br />
be significantly increased<br />
If a credit or loan is used by an investor to finance the acquisition of the Notes and the Notes<br />
subsequently go into default, or if their trading price diminishes significantly, the investor may<br />
not only incur a loss on the investment but will also have to repay the loan and interest<br />
payable thereon. A credit or loan may significantly increase the risk of a loss. Investors should<br />
not assume that they will be able to repay the loan or pay interest thereon from the profits of a<br />
transaction or income from Notes. Instead, investors should assess their financial situation<br />
prior to an investment as to whether they are able to pay interest on the loan as well as repay<br />
the loan on demand and consider that they may suffer losses instead of realising gains.<br />
Incidental costs associated with the purchase and sale of the Notes may have a<br />
significant impact on the potential return on the Notes<br />
When Notes are purchased or sold, several types of incidental costs (including transaction<br />
fees and commissions) may be incurred in addition to the purchase or sale price of the Notes.<br />
These incidental costs may significantly reduce or eliminate any income from holding the<br />
Notes. Credit institutions as a rule charge commissions either as fixed minimum commissions<br />
or as pro-rata commissions depending on the order value. To the extent that additional –<br />
domestic or foreign – parties are involved in the execution of an order, including but not<br />
limited to domestic dealers or brokers in foreign markets, investors may also be charged<br />
brokerage fees, commissions and other fees and expenses of such parties (third-party costs).<br />
In addition to the costs directly related to the purchase of Notes (direct costs), investors must<br />
also take into account follow-up costs (such as custodian fees). Investors should inform<br />
themselves about any additional costs incurred in connection with the purchase, custody or<br />
sale of the Notes before investing in the Notes.<br />
Page 28
Investors have to rely on the functionality of the relevant clearing system<br />
The Notes are purchased and sold through Oesterreichische Kontrollbank Aktiengesellschaft.<br />
The Issuer does not assume any responsibility as to whether the Notes are actually<br />
transferred to the securities portfolio of the relevant investor. Investors have to rely on the<br />
functionality of the relevant clearing system.<br />
The tax impact of an investment in the Notes should be carefully considered<br />
Interest payments on Notes and profits realised by an investor upon the sale or redemption of<br />
Notes may be subject to taxation in their home jurisdiction or in other jurisdictions. The tax<br />
impact on investors in general is described under "Taxation"; however, the tax impact on an<br />
individual investor may differ from the situation described for investors in general. Prospective<br />
investors should therefore contact their own tax advisors for advice on the tax impact of an<br />
investment in the Notes. Furthermore, the applicable tax regime may change to the<br />
disadvantage of investors in the future.<br />
The Notes are governed by Austrian law, and changes in applicable laws, regulations<br />
or regulatory policies may have an adverse effect on the Issuer, the Notes and the<br />
investors<br />
The Terms and Conditions of the Notes will be governed by Austrian law. Investors should<br />
therefore note that the governing law may not be the law of their own home jurisdiction and<br />
that the law applicable to the Notes may not provide them with similar or adequate protection<br />
as their own law. Furthermore, no assurance can be given or statement made as to the<br />
impact of any possible judicial decision or change to Austrian law (or law applicable in<br />
Austria) or administrative practice after the date of this Prospectus.<br />
Page 29
GENERAL DESCRIPTION OF THE PROGRAMME<br />
The following overview does not purport to be complete and consists of information contained<br />
in the remaining part of this Prospectus and in the relevant applicable Terms and Conditions<br />
of the Notes.<br />
Words and expressions defined or used in "Terms and Conditions of the Notes" and/or in the<br />
respective "Final Terms" below shall have the same meanings in this overview.<br />
Issuer <strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong><br />
Privatstiftung<br />
Arranger and Dealer Erste Group Bank AG, Graben 21, A-1010 Vienna<br />
Description Programme for the Issuance of Notes<br />
Paying Agent; Calculation Agent Erste Group Bank AG, Graben 21, A-1010 Vienna<br />
Method of issue The Notes will be issued on a non-syndicated<br />
basis only.<br />
The Notes will be issued in series (each a<br />
"Series") having one or more issue dates and on<br />
terms otherwise identical (or identical other than<br />
in respect of the first payment of interest), the<br />
Notes of each Series being intended to be<br />
interchangeable with all other Notes of that<br />
Series. Each Series may be issued in tranches<br />
(each a "Tranche") on the same or different issue<br />
dates. The specific terms of each Tranche will be<br />
set out in the Terms and Conditions of the Notes.<br />
Consolidation Notes of one Series may be consolidated with<br />
Notes of another Series and provisions in respect<br />
of such consolidation will be contained in the<br />
relevant Final Terms.<br />
Issue price Notes may be issued at their principal amount or<br />
at a discount or premium to their principal<br />
amount. In case of tap issues the aggregated<br />
number of the outstanding Notes issues is<br />
determined in the Final Terms at the start of their<br />
term and thereafter is fixed by the Issuer<br />
continuously according to market conditions<br />
prevailing from time to time. An agio or issue<br />
surcharge, if any, will be set out in the relevant<br />
Final Terms.<br />
Form of Notes The Notes will be issued in bearer form only and<br />
each Series of Notes in bearer form will be<br />
Page 30
epresented by a global note in bearer form<br />
without interest coupons which is executed on<br />
behalf of the Issuer.<br />
Central Securities Depositary On or before the Issue date of each Tranche, the<br />
Notes in bearer form represented by a Global<br />
Note in bearer form without interest coupons will<br />
be deposited with the OeKB. Each Global Note<br />
will be deposited with the OeKB as central<br />
securities depositary until all obligations of the<br />
Issuer under the Notes have been satisfied. The<br />
Noteholders will receive co-ownership<br />
participations or rights in the Global Bond that are<br />
transferable in accordance with the general<br />
business conditions and provisions of the central<br />
securities depositary and in accordance with the<br />
applicable laws.<br />
Currencies Subject to compliance with all relevant laws,<br />
regulations and directives, Notes may be issued<br />
in the following currencies: EUR, CZK or SKK.<br />
Maturities The maturity of the Notes will be contained in the<br />
relevant Final Terms. The Notes will not have a<br />
minimum or maximum maturity.<br />
Denomination Notes will be issued in such denominations as<br />
specified in the relevant Final Terms, save that<br />
the minimum denomination of the Notes will be<br />
Euro 1,000 or, if any currency other than Euro, in<br />
an amount in such other currency equal to or<br />
exceeding the equivalent of Euro 1,000 at the<br />
time of the issue of the Notes.<br />
Fixed Interest Rate Notes Fixed interest will be payable in arrear on the<br />
date or dates in each year specified in the<br />
relevant Final Terms.<br />
Floating Rate Notes Floating Rate Notes will bear interest set<br />
separately for each Series in the relevant Final<br />
Terms.<br />
Zero Coupon Notes Zero Coupon Notes may be issued at their<br />
principal amount or at a discount to it and will not<br />
bear interest.<br />
Interest Periods and Interest Rates The length of the interest periods for the Notes<br />
and the applicable interest rate or its method of<br />
calculation may differ from time to time or be<br />
constant for any Series. Notes may have a<br />
Page 31
maximum interest rate, a minimum interest rate<br />
or both. All such information will be set out in the<br />
relevant Final Terms.<br />
Redemption Notes may be redeemable at par or at such other<br />
Redemption Amount (detailed in a formula or<br />
otherwise) as will be specified in the relevant<br />
Final Terms.<br />
Optional redemption The Final Terms issued in respect of each issue<br />
of Notes will state whether such Notes may be<br />
redeemed (either in whole or in part) prior to their<br />
stated maturity (if any) at the option of the Issuer<br />
and if so the terms applicable to such<br />
redemption.<br />
Investors should note that where the Terms and<br />
Conditions of the Notes provide for a right of early<br />
redemption by the Issuer only, Noteholders<br />
usually receive a higher yield on their Notes than<br />
they would if they were also granted a right to<br />
early redeem the Notes. The Noteholders are not<br />
entitled to redeem the Notes prior to their<br />
maturity. Excluding the Noteholders' right to<br />
redeem Notes prior to their maturity is often a<br />
precondition for the Issuer being able to hedge its<br />
exposure under the Notes. Thus, without early<br />
redemption by Noteholders being excluded, the<br />
Issuer would not be able to issue Notes at all, or<br />
the Issuer would factor the potential hedging<br />
break costs into the redemption amount of the<br />
Notes, thus reducing the yield investors receive<br />
from the Notes. Investors should therefore<br />
carefully consider whether they think that a right<br />
of early redemption only for the Issuer would be<br />
to their detriment, and should, if they think that<br />
this is the case, not invest in the Notes.<br />
Withholding tax All payments of principal and interest in respect of<br />
the Notes will be made after withholding or<br />
deduction for, any taxes, duties, assessments or<br />
governmental charges of whatever nature<br />
imposed, levied, collected, withheld or assessed<br />
by the Republic of Austria or any political<br />
subdivision or any authority of or in the Republic<br />
of Austria that has power to tax.<br />
Governing law The Notes will be governed by Austrian law<br />
excluding its conflict of laws rules.<br />
Place of jurisdiction For all disputes which may arise out or in<br />
connection with the Notes, the commercial court<br />
competent for Vienna, Inner City, shall have<br />
Page 32
exclusive jurisdiction. Consumers within the<br />
meaning of the Austrian Consumer Protection Act<br />
may take proceedings in any other court of<br />
competent jurisdiction.<br />
Use of proceeds The net proceeds from the issue of Notes will be<br />
used by <strong>ERSTE</strong> Foundation for its general<br />
funding and refinancing purposes and to achieve<br />
its foundation aims.<br />
Selling restrictions The Notes have not been and will not be<br />
registered under the Securities Act nor by any<br />
authority of a State in the U.S. or according to the<br />
applicable securities regulations in Australia,<br />
Canada, Japan or United Kingdom and may not<br />
be offered, sold or delivered within the U.S. or, for<br />
the account and benefit of U.S. persons or any<br />
other persons in Australia, Canada, Japan or<br />
United Kingdom.<br />
Page 33
TERMS AND CONDITIONS<br />
The Issuer will complete and supplement the terms and conditions set forth below (the<br />
"Terms and Conditions") for each issuance of Notes by the terms of the final terms (the<br />
"Final Terms") so that for each issuance of Notes the terms and conditions are available on<br />
the basis of the combination of the Terms and Conditions and the Final Terms. The provisions<br />
of these Terms and Conditions set out in square brackets and/or instructions and explanatory<br />
notes shall be deemed to be completed or supplemented by the information contained in the<br />
Final Terms. Instructions highlighted in italics are not part of the Terms and Conditions.<br />
Changes may be made in the numbering, if necessary.<br />
In order to increase the readability of the applicable terms and conditions for the issue of<br />
Notes, in addition the Issuer will attach the supplemented Terms and Conditions for the Notes<br />
as Appendix to the Final Terms. In case of inconsistency between the Terms and Conditions<br />
and the consolidated Terms and Conditions for the Notes the first one shall prevail.<br />
Copies of the Final Terms and the consolidated Notes may be obtained free of charge by any<br />
Noteholder at the specified office of the Issuer and at the specified office of the Paying Agent.<br />
Page 34
Terms and Conditions<br />
[Title of Notes]<br />
[Series Number]<br />
[ISIN]<br />
§ 1<br />
Form and Principal Amount<br />
(1) This Series of Notes (the "Notes") of <strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong><br />
Privatstiftung (the "Issuer") in the aggregate principal amount of [insert currency] (the<br />
"Specified Currency") [in case of tap issue insert: up to [EUR] [insert issue<br />
amount] (in words: up to [Euro] [insert issue amount in words])] [in case of single<br />
issue insert: aggregate principal amount (in words: [aggregate principal amount in<br />
words)] issued on [Insert issue date] (the "Issue Date") and is divided in<br />
denominations of [insert denominations] (the "Specified Denomination").<br />
(2) The Notes are represented by one or more changeable global notes (each a "Global<br />
Note") without interest coupons which shall be signed manually by authorised<br />
signatories of the Issuer and shall be authenticated by or on behalf of the Paying Agent.<br />
The Notes are made out to the holder of the Notes and the holders of the Notes (the<br />
"Noteholders") shall not have the right to request the issuance of effective Notes.<br />
(3) Each Global Note will be deposited with the Oesterreichische Kontrollbank<br />
Aktiengesellschaft as central securities depositary (the "Central Securities<br />
Depositary") until all obligations of the Issuer under the Notes have been satisfied. The<br />
Noteholders will receive co-ownership participations or rights in the respective Global<br />
Bond which are transferable in accordance with the general business conditions and<br />
provisions of the Central Securities Depositary and in accordance with applicable laws.<br />
§ 2<br />
Status<br />
The Notes constitute senior and unsecured obligations of the Issuer and rank pari passu<br />
without any preference among themselves and at least pari passu with all other senior and<br />
unsecured obligations of the Issuer, save for obligations which are preferred by applicable<br />
mandatory law.<br />
[In case of tap issues insert:<br />
§ 3<br />
Issue Price<br />
The Issue Price shall be initially [100%] [insert different percentage] of the Specified<br />
Denomination [, plus an issue surcharge in the amount of [insert issue surcharge]], which<br />
will be continuously adjusted according to market conditions.]<br />
[In case of issues other than tap issues insert:<br />
The Issue Price shall be [100%] [insert different percentage] of the Specified Denomination<br />
[, plus an issue surcharge in the amount of [insert issue surcharge]].]<br />
Page 35
§ 4<br />
Maturity<br />
The maturity of the Notes begins on [insert Commencement Date] and ends with expiry of<br />
the day before [insert Maturity Date].<br />
§ 5<br />
Interest<br />
[In case of Zero Coupon Notes insert: There will not be any periodic payments of interest<br />
on the Notes.]<br />
[In case of Fixed Rate Notes insert:<br />
(1) The Notes shall bear interest on their Specified Denomination at the rate of [insert<br />
Rate of Interest] per cent. per annum from (and including) [insert Fixed Interest<br />
Commencement Date] (the "Interest Commencement Date") to (but excluding) the<br />
Maturity Date (as defined in § 6(1)) [insert other relevant date(s) in case of Notes<br />
without fixed maturity date].<br />
(2) Interest shall be payable subsequently on [insert Fixed Interest Payment Date(s)]<br />
each year (each a "Fixed Interest Payment Date"). The first interest payment shall be<br />
made on [insert first Fixed Interest Payment Date] (the "First Fixed Interest<br />
Payment Date").<br />
(3) "Fixed Interest Period" means the period from (and including) the Fixed Interest<br />
Commencement Date to (but excluding) the First Fixed Interest Payment Date and any<br />
subsequent period from (and including) a Fixed Interest Payment Date to and excluding<br />
the next Fixed Interest Payment Date [in case of adjustment of the Interest Period<br />
insert: , adjusted in accordance with § 7(2), if applicable].]<br />
[In case of Floating Rate Notes insert:<br />
(1) The Notes shall bear interest on their Specified Denomination [per annum/half<br />
yearly/quarter yearly] at the Floating Interest Rate (as defined below) from (and<br />
including) [insert Floating Interest Commencement Date] (the "Floating Interest<br />
Commencement Date") to (but excluding) the Maturity Date (as defined in §6(1))<br />
[insert other relevant date(s) in case of Notes without fixed maturity date].<br />
(2) Interest shall be payable subsequently on each Floating Interest Payment Date.<br />
"Floating Interest Payment Date" means [in case of Specified Floating Interest<br />
Payment Dates insert: each [insert Specified Floating Interest Payment Date] of<br />
each year.] The first floating interest payment shall be made on [insert first Floating<br />
Interest Payment Date] (the "First Floating Interest Payment Date").<br />
(3) "Floating Interest Period" means the period from (and including) the Floating Interest<br />
Commencement Date to (but excluding) the First Interest Payment Date and any<br />
subsequent period from (and including) a Floating Interest Payment Date to (and<br />
excluding) the next Floating Interest Payment Date. [in case of an adjustment of the<br />
Interest Period insert: , adjusted in accordance with § 7(2), if applicable].<br />
(4) The floating interest rate (the "Floating Interest Rate") for each Floating Interest<br />
Period shall be determined as follows:<br />
[insert interest rate or formula]<br />
[insert description of the formula]<br />
Page 36
[insert definition of EURIBOR and EURIBOR screen page]<br />
[insert definition of LIBOR and LIBOR screen page]<br />
[insert definition of CMS and EURIBOR screen page]<br />
[insert other floating interest rate and screen page]<br />
[In case the screen page is not available for free, insert the following: The access<br />
to information on the screen page is only available at a charge. Such information is<br />
available free of charge from the Issuer.]<br />
[If Minimum Rate of Interest applies insert: If the Floating Interest Rate determined<br />
in accordance with the above provisions for a Floating Interest Period is less than<br />
[insert Minimum Rate of Interest], the Floating Interest Rate for such Floating Interest<br />
Period shall be [insert Minimum Rate of Interest].]<br />
[If Maximum rate of Interest applies insert: If the Floating Interest Rate determined in<br />
accordance with the above provisions for a Floating Interest Period is higher than<br />
[insert Maximum Rate of Interest], the Floating Interest Rate for such Floating<br />
Interest Period shall be [insert Maximum Rate of Interest].]<br />
[insert provisions for a barrier, if applicable]<br />
[insert other or further provisions relating to Floating Rate Notes]<br />
[insert provisions for changes of rates of interest]<br />
[(5) If no quotation pursuant to § 5(4) appears on the screen page as of the specified time,<br />
the Calculation Agent shall request offices of four [banks whose offered rates were<br />
used to determine such quotation when such quotation last appeared on the screen<br />
page] [specify other reference banks] (the "Reference Banks") to provide the<br />
Calculation Agent with their offered quotations (expressed as a percentage rate per<br />
annum) for deposits in the specified currency for the relevant Interest Period (as<br />
defined below) to leading banks [in the [London] interbank market] [in the euro-zone]<br />
(the "Relevant Market") at approximately the specified time on the Floating Interest<br />
Determination Date. If two or more of the Reference Banks provide the Calculation<br />
Agent with such offered quotations, the [specify Interest Basis] for such Floating<br />
Interest Period shall be the arithmetic mean (in case the reference rate is EURIBOR,<br />
rounded if necessary to the nearest one thousandth of a percentage point, with 0.0005<br />
being rounded upwards and otherwise one hundred-thousandth of a percentage point,<br />
with 0.000005 being rounded upwards) of such offered quotations. If on any Floating<br />
Interest Determination Date only one or none of the Reference Banks provides the<br />
Calculation Agent with such offered quotations, the [specify Interest Basis] for the<br />
relevant Floating Interest Period shall be calculated as follows:<br />
The [specify Interest Basis] shall be the arithmetic mean (rounded if necessary as<br />
specified above) of the rates offered to the Calculation Agent by the selected Reference<br />
Banks at 11.00 am (Brussels time) for deposits in the specified currency for the relevant<br />
Floating Interest Period.<br />
If less than two of the Reference Banks provide the Calculation Agent with such offered<br />
quotations, the [specify Interest Basis] for the relevant Floating Interest Period shall<br />
be the offered quotation for deposits in the specified Currency for the relevant Floating<br />
Interest Period or the arithmetic mean (rounded if necessary as specified above) of the<br />
offered quotation for deposits in the specified Currency for the relevant Floating Interest<br />
Period, which is provided by one or more banks to the Calculation Agent as the rate, at<br />
which they are quoting to leading banks in the Relevant Market on the relevant Floating<br />
Page 37
Interest Determination Date (accordingly which such banks inform the Calculation<br />
Agent).<br />
For the case that the [insert Interest Basis] cannot be determined in accordance with<br />
the foregoing provisions of this paragraph, the [insert Interest Basis] shall be the<br />
offered quotation or the arithmetic mean of the offered quotations on the last day<br />
preceding the Floating Interest Determination Date on which such quotations were<br />
offered.<br />
"Floating Interest Determination Date" means the [second] [insert other number of<br />
days] Interest Determination Business Day (as defined below) prior the beginning of<br />
the relevant Floating Interest Period.<br />
"Interest Determination Business Day" means a day on which (other than Saturday<br />
and Sunday) [banks in [Vienna] [insert other place or places] are open for business<br />
and] the TARGET System is operative to effect payments in Euro. "TARGET System"<br />
means the "European Automated Real-Time Gross Settlement Express Transfer<br />
(TARGET) payment system which utilises a single shared platform and which was<br />
launched on 19 November 2007 (TARGET2) or any successor thereto.]]<br />
[(4)]/[(5)]/[(6)] "Day Count Fraction" means, in respect of the calculation of an amount for<br />
any period of time (the "Calculation Period"):<br />
[in the case of "30/360":<br />
The number of days in the Calculation Period divided by 360 (the number of days to be<br />
calculated on the basis of a year of 360 days with twelve 30-day months (unless (i) the<br />
last day of Calculation Period is the 31st day of a month but the first day of the<br />
Calculation Period is a day other than the 30th or 31st day of a month, in which case<br />
the month that includes that last day shall not be considered to be shortened to a 30day<br />
month, or (ii) the last day of the Calculation Period is the last day of the month of<br />
February, in which case the month of February shall not be considered to be<br />
lengthened to a 30-day month)).]<br />
[in the case of "Actual/Actual (ICMA)":<br />
(a) If the Calculation Period is equal to or shorter than the Interest Period during<br />
which it falls, the actual number of days in the Calculation Period divided by the<br />
product of (i) the actual number of days in such Interest Period and (ii) the<br />
number of Interest Periods in any calendar year.<br />
(b) If the Calculation Period is longer than one Interest Period, the sum of: (i) the<br />
actual number of days in such Calculation Period falling in the Interest Period in<br />
which it begins divided by the product of (x) the actual number of days in such<br />
Interest Period and (y) the number of Interest Periods in any year; and (ii) the<br />
actual number of days in such Calculation Period falling in the next Interest<br />
Period divided by the product of (x) the actual number of days in such Interest<br />
Period and (y) the number of Interest Periods in any year.]<br />
[in the case of "30E/360" or "Eurobond Basis":<br />
The number of days in the Calculation Period divided by 360 (unless, in the case of the<br />
final Calculation Period, the Maturity Date is the last day of the month of February, in<br />
which case the month of February shall not be considered to be lengthened to a 30-day<br />
month).]<br />
Page 38
[in the case of "Actual/365" or "Actual/Actual (ISDA)":<br />
The actual number of days in the Calculation Period divided by 365 (or, if any portion of<br />
the Calculation Period falls in a leap year, the sum of (i) the actual number of days in<br />
that portion of the Calculation Period falling in a leap year divided by 366 and (ii) the<br />
actual number of days in that portion of the Calculation Period falling in a non-leap year<br />
divided by 365).]<br />
[in the case of "Actual/365 (Fixed)" insert:<br />
The actual number of days in the Calculation Period divided by 365.]<br />
[in the case of "Actual/360":<br />
The actual number of days in the Calculation Period divided by 360.]<br />
§ 6<br />
Redemption<br />
(1) [insert in case of Notes with a fixed maturity date: The Notes shall be redeemed at<br />
their Final Redemption Amount on [insert maturity date] (the "Maturity Date").]<br />
[in case of Notes without fixed maturity date insert other relevant provisions]<br />
[insert further events/definitions]<br />
[(2) in case of early redemption at the option of the Issuer, insert: The Issuer may<br />
redeem all [or some only] of the Notes then outstanding on [insert optional<br />
redemption date(s)] ([the] [each an] "Optional Redemption Date") at their Optional<br />
Redemption Amount (as defined below), together with any interest accrued until (but<br />
excluding) the relevant Optional Redemption Date upon having given not less than<br />
[five] [insert other number] Business Days' notice to the Noteholders in accordance<br />
with § 12. Any such redemption must refer to Notes with a principal amount equal to a<br />
Specified Denomination or a multiple of it. [in case of a partial redemption insert: In<br />
the case of a partial redemption of Notes, the Notes to be redeemed will be selected in<br />
accordance with the rules of [the Central Securities Depositary] [insert other rules] at<br />
the latest 30 days before the specified redemption date.<br />
Notice: Investors should note that where the Terms and Conditions of the Notes<br />
provide for a right of early redemption by the Issuer only, Noteholders usually receive a<br />
higher yield on their Notes than they would if they were also granted a right to early<br />
redeem the Notes. The Noteholders are not entitled to redeem the Notes prior to their<br />
maturity. Excluding the Noteholders' right to redeem Notes prior to their maturity is often<br />
a precondition for the Issuer being able to hedge its exposure under the Notes. Thus,<br />
without early redemption by Noteholders being excluded, the Issuer would not be able<br />
to issue Notes at all, or the Issuer would factor the potential hedging break costs into<br />
the redemption amount of the Notes, thus reducing the yield investors receive from the<br />
Notes. Investors should therefore carefully consider whether they think that a right of<br />
early redemption only for the Issuer would be to their detriment, and should, if they think<br />
that this is the case, not invest in the Notes.]<br />
[(2)]/[(3)] The "Final Redemption Amount" [in respect of each Note shall be [its<br />
Specified Denomination] [otherwise, insert Final Redemption Amount per<br />
Specified Denomination or other calculation method].]<br />
[The "Optional Redemption Amount" in respect of each Note shall be [its Specified<br />
Denomination] [otherwise, insert Final Redemption Amount per Specified<br />
Denomination or other calculation method].]<br />
Page 39
[The "Minimum Redemption Amount" in respect of each Note shall be [insert<br />
amount] and the "Maximum Redemption Amount" in respect of each Note shall be<br />
[insert amount].]<br />
§ 7<br />
Payments<br />
(1) Payments of principal as well as payments of interest ("Payments") in respect of the<br />
Notes shall be made subject to applicable fiscal and other laws and regulations in the<br />
Specified Currency.<br />
(2) If the due date of any payment under the Notes would fall on a day which is not a<br />
Business Day, the payment date shall be:<br />
[If Following Business Day Convention applies insert: postponed to the next day<br />
that is a Business Day [in case of an adjustment of the Interest Period insert:<br />
Accordingly, this results in an extension/reduction of the current and/or the following<br />
Interest Period and in a reduction/increase of the respective interest amounts].]<br />
[If Modified Following Business Day Convention applies insert: postponed to the<br />
next day which is a Business Day unless it would thereby fall into the next calendar<br />
month, in which event the Interest Payment Date shall be the immediately preceding<br />
Business Day.] [in case of an adjustment of the Interest Period insert: Accordingly,<br />
this results in an extension/reduction of the current and/or the following Interest Period<br />
and in a reduction/increase of the respective interest amounts].]<br />
[If Floating Rate Note Convention ("FRN Convention") applies insert: postponed to<br />
the next day which is a Business Day unless it would thereby fall into the next calendar<br />
month, in which event (i) the Interest Payment Date shall be the immediately preceding<br />
Business Day and (ii) each subsequent Interest Payment Date shall be the last<br />
Business Day in the month in which it would fall into without the adjustment. [in case of<br />
an adjustment of the Interest Period insert: Accordingly, this results in an<br />
extension/reduction of the current and/or the following Interest Period and in a<br />
reduction/increase of the respective interest amounts].]<br />
[If Preceding Business Day Convention applies insert:] the immediately preceding<br />
Business Day. in case of adjustment of the Interest Period insert: Accordingly this<br />
would affect an extension/reduction of the recent and the next Interest Periods and a<br />
reduction/increase of each interest amount.].] [in case of an adjustment of the<br />
Interest Period insert: Accordingly, this results in an extension/reduction of the current<br />
and/or the following Interest Period and in a reduction/increase of the respective<br />
interest amounts].]<br />
(3) "Business Day" means a day on which (other than Saturday and Sunday) [banks in<br />
[Vienna] [insert other place or places] are open for business and] the TARGET<br />
System is operating to effect payments in Euro.<br />
§ 8<br />
Paying Agent. Calculation Agent<br />
The Erste Group Bank AG shall be the paying agent (the "Paying Agent") and the calculation<br />
agent (the "Calculation Agent"). The Issuer reserves the right at any time to vary or<br />
terminate the appointment of any Paying Agent and/or the Calculation Agent and to appoint<br />
successor or additional paying agents and/or calculation agents. Notice of any change in the<br />
paying agents and/or the calculation agent will promptly be given to the Noteholders pursuant<br />
to § 12.<br />
Page 40
§ 9<br />
Taxation<br />
All payments of principal and interest in respect of the Notes will be made after withholding or<br />
deduction of any taxes, duties, assessments or fees which will be levied, withheld or<br />
assessed by the Republic of Austria or any tax authority of or in the Republic of Austria that<br />
has power to tax,<br />
§ 10<br />
Limitation<br />
The limitation period for claims of the Noteholders in respect of repayment of principal of the<br />
Notes shall be thirty years, and in respect of interest claims of the Noteholders three years, in<br />
each case after the respective due date.<br />
§ 11<br />
Further Issues of Notes, Repurchase and Cancellation<br />
(1) The Issuer may at any time without the consent of the Noteholders issue further bonds<br />
which have the same terms as these Notes in all respects (if applicable, except for the<br />
issue date, the start of the interest accrual and the issue price) so that they form a<br />
single Series with these Notes; in such case, the definition of "Notes" shall be<br />
interpreted accordingly.<br />
(2) The Issuer may at any time purchase Notes in the open market or otherwise and at any<br />
price. As far as such repurchases are made in form of public offers, such offer shall be<br />
open to all Noteholders.<br />
(3) All repurchased Notes may be cancelled, held or resold by the Issuer.<br />
§ 12<br />
Notices<br />
(1) All notices concerning the Notes shall be published on the website<br />
[www.erstestiftung.org] [insert other]. Any notice so given will be deemed to have<br />
been validly given on the [[fifth] [insert other] day following] the date of such<br />
publication (or, if published more than once, on the [[fifth] [insert other] day following]<br />
the date of the first such publication). Any legal reporting obligation shall remain<br />
unaffected. Legally material notices shall be given to the Noteholders by the securities<br />
account keeping entity.]<br />
(2) [The Issuer may instead of a publication pursuant to subparagraph 1 above deliver the<br />
relevant notice to the Central Securities Depositary for forwarding to the Noteholders.<br />
Any such notice shall be deemed to have been given to the Noteholders on the [[fifth]<br />
[insert other] day after the] day on which said notice was given to the Central<br />
Securities Depositary.]<br />
§ 13<br />
Governing Law. Jurisdiction<br />
(1) The Notes shall be governed by Austrian law excluding its conflict of law rules.<br />
(2) For all disputes which may arise out or in connection with the Notes, the commercial<br />
court competent for Vienna, First District, shall have exclusive jurisdiction. Consumers<br />
according to the Austrian Consumer Protection Act may also pursue their claims in any<br />
other court of competent jurisdiction.<br />
Page 41
FORM OF FINAL TERMS<br />
Final Terms<br />
<strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung<br />
[Company logo of <strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung]<br />
Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]<br />
(Series �)<br />
(the "Notes")<br />
pursuant to the<br />
Programme for the Issuance of Notes<br />
dated [�]<br />
[Date]<br />
These Final Terms contain the final terms (within the meaning of Article 5.4 of the Prospectus<br />
Directive as amended by the 2010 PD Amending Directive 1 to the extent implemented in the<br />
Relevant Member State) for the issuance of Notes under the Programme for the Issuance of<br />
Notes (the "Programme") of <strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung (the<br />
"Issuer") and shall be read in conjunction with the terms and conditions of the Notes<br />
contained in the Base Prospectus under the Programme dated �, as supplemented from time<br />
to time (together the "Terms and Conditions") and (if not identical) together with the latest<br />
approved and published Prospectus relating to the Programme.<br />
Terms used herein which are defined in the Terms and Conditions shall have the same<br />
meaning, unless these Final Terms give them a different meaning. References to paragraphs<br />
in these Final Terms refer to paragraphs of the Terms and Conditions.<br />
These Final Terms contain data and text to which the Terms and Conditions refer. To the<br />
extent the Terms and Conditions and these Final Terms are contradictory, the Final Terms<br />
shall prevail. The Final Terms may modify or/and supplement the Terms and Conditions.<br />
These Final Terms are available on the website of the [Issuer under "www.erstestiftung.org"].<br />
1 Directive 2010/73/EU (the "2010 PD Amending Directive") amending the Prospectus Directive 2003/71/EC and<br />
the Transparency Directive 2004/109/EC increases the minimum denomination threshold per debt security from<br />
€50,000 to €100,000, or its equivalent in another currency, for the qualification of a debt security as wholesale debt<br />
with regard to the wholesale disclosure requirements and the exemptions under the Prospectus Directive. For the<br />
increased minimum denomination threshold to become applicable, the 2010 PD Amending Directive must be<br />
implemented into the relevant national law of the jurisdictions into which the Prospectus has been passported and<br />
in which Notes will be listed on a stock exchange and/or publicly offered and distributed. Please note that after the<br />
implementation of the 2010 PD Amending Directive the reference to "€50,000" in the Final Terms shall be read as<br />
"€100,000".<br />
Page 42
[In case of early redemption on the option of the Issuer, insert: Investors should note that<br />
where the Terms and Conditions of the Notes provide for a right of early redemption by the<br />
Issuer only, Noteholders usually receive a higher yield on their Notes than they would if they<br />
were also granted a right to early redeem the Notes. The Noteholders are not entitled to<br />
redeem the Notes prior to their maturity. Excluding the Noteholders' right to redeem Notes<br />
prior to their maturity is often a precondition for the Issuer being able to hedge its exposure<br />
under the Notes. Thus, without early redemption by Noteholders being excluded, the Issuer<br />
would not be able to issue Notes at all, or the Issuer would factor the potential hedging break<br />
costs into the redemption amount of the Notes, thus reducing the yield investors receive from<br />
the Notes. Investors should therefore carefully consider whether they think that a right of early<br />
redemption only for the Issuer would be to their detriment, and should, if they think that this is<br />
the case, not invest in the Notes.]<br />
GENERAL PROVISIONS<br />
1.<br />
2.<br />
3.<br />
4.<br />
5.<br />
6.<br />
7.<br />
8.<br />
9.<br />
Title of Notes: [�]<br />
Series Number: [�]<br />
Status:<br />
Aggregate Nominal Amount of Notes:<br />
Senior<br />
[�]<br />
Specified Currency: [�]<br />
Issue Price: [�]<br />
Issue Surcharge: [�] [Not Applicable]<br />
Specified Denomination(s): [�]<br />
(i) Issue Date:<br />
(ii) Tap Issue<br />
INTEREST RATE<br />
10.<br />
11.<br />
Fixed Rate:<br />
(i) Rate[(s)] of Interest:<br />
(ii) Fixed Interest Commencement Date:<br />
(iii) Fixed Interest Payment Dates:<br />
Floating Rate:<br />
[�]<br />
[Applicable/Not Applicable]<br />
[Applicable/Not Applicable]<br />
(if not applicable, delete the remaining<br />
subparagraphs of this paragraph)<br />
[�] % per annum<br />
[�]<br />
[�]; the first Fixed Interest Payment<br />
Date is the [�]<br />
[Interest Period will be adjusted]<br />
[Interest Period will not be adjusted]<br />
[Applicable/Not Applicable]<br />
(if not applicable, delete the remaining<br />
subparagraphs of this paragraph)<br />
Page 43
12.<br />
13.<br />
(i) Floating Rate[(s)]:<br />
(ii) Interest:<br />
(iii) Floating Interest Commencement Date:<br />
(iv) Floating Interest Payment Dates:<br />
(v) Floating Rate Determination Date and<br />
Interest Determination Business Day<br />
(vi) Insert other provisions, in particular for<br />
minimum interest rate, maximum<br />
interest rate, barrier, change of interest<br />
rate, Reference Banks, relevant market<br />
and/or other details relating to interest:<br />
(vii) Calculation Agent:<br />
[�] (insert method of calculation)<br />
[per annum] [half-yearly] [quarterly]<br />
[�] (insert other)<br />
[�]<br />
[�]; the first Floating Interest Payment<br />
Date is the [�]<br />
[Interest period will be adjusted]<br />
[Interest period will not be adjusted<br />
[�]<br />
[�]<br />
[Erste Group Bank AG, Graben 21, A-<br />
1010 Vienna]<br />
[if not Erste Group Bank AG, insert<br />
other]<br />
Day Count Fraction: [30/ 360]<br />
[Actual/Actual (ICMA)]<br />
[30E/ 360 or Eurobond Basis]<br />
[Actual/ 365 or Actual/Actual (ISDA)]<br />
[Actual/ 365 (Fixed)]<br />
[Actual/ 360]<br />
[�] (insert other)<br />
Zero Coupon Notes: [Applicable/Not Applicable]<br />
(insert further provisions)<br />
REDEMPTION<br />
14.<br />
15.<br />
16.<br />
Maturity Date: [�] (if no fixed maturity date, insert<br />
other relevant provisions)<br />
Redemption Amount:<br />
Early Redemption at the option of the Issuer (§<br />
6 (2)):<br />
(i) Optional Redemption Date(s):<br />
(ii) Optional Redemption Amount(s):<br />
[Specified Denomination] [�] (if not the<br />
Specified Denomination, insert other<br />
amount)<br />
[�] (insert method of calculation)<br />
[Applicable/Not Applicable]<br />
(if not applicable, delete the remaining<br />
subparagraphs of this paragraph<br />
[�]<br />
[[�] per Specified Denomination of [�]<br />
(if not the Specified Denomination)]<br />
[�] (insert method of calculation)<br />
Page 44
17.<br />
18.<br />
(iii) Partial Redemption:<br />
(iv) Notice period<br />
Business Day (§ 7(3)) [and the Interest<br />
Determination Business Day (§ 5(5))]:<br />
Further provisions relating to redemption,<br />
Maximum and/or Minimum Redemption<br />
Amount etc:<br />
OTHER INFORMATION<br />
19.<br />
20.<br />
21.<br />
22.<br />
23.<br />
24.<br />
[Applicable/Not Applicable] (insert<br />
rules, if necessary)<br />
Estimated total expenses: [Applicable/Not Applicable; if<br />
applicable, give details]<br />
(i) Issue yield:<br />
(ii) Method used to calculate issue yield:<br />
[�]<br />
[�]<br />
[�]<br />
[Applicable/Not Applicable] (Applicable<br />
only for Fixed Rate Notes or Zero<br />
Coupon Notes)<br />
The issue yield will be calculated on the<br />
Issue Date on the basis of the Issue<br />
Price and is no indication for a yield in<br />
the future.<br />
[(IRR, Internal Rate of Return)]<br />
[�] (insert other method)<br />
Clearing System(s): [Notes will be cleared through OeKB,<br />
Oesterreichische Kontrollbank<br />
Aktiengesellschaft, at Am Hof 4, A-<br />
1010 Vienna, Austria (and may be<br />
settled through Euroclear and<br />
Clearstream, Luxembourg) or with or<br />
on behalf of the Issuer.]<br />
[�] (insert other Clearing System)<br />
Paying Agent: [Erste Group Bank AG, Graben 21, A-<br />
1010 Vienna]<br />
(i) ISIN:<br />
(ii) Common Code:<br />
Website for publications:<br />
INFORMATION RELATING TO THE OFFER<br />
25.<br />
[�] (if not Erste Group Bank AG: insert<br />
other)<br />
[�]<br />
[�] [Not Applicable]<br />
Subscription period: (Insert details, including the possibility<br />
to reduce the subscription period<br />
and/or to reduce subscriptions and the<br />
manner for refunding excess amount<br />
paid by applicants)<br />
[�]<br />
Page 45
26.<br />
27.<br />
28.<br />
29.<br />
30.<br />
31.<br />
32.<br />
Terms applicable to the offer:<br />
Minimum and/or Maximum Subscription<br />
Amount:<br />
Coordinators and/or Distributor:<br />
(if not the Arranger)<br />
[Applicable/Not Applicable] (if<br />
applicable, give details)<br />
[Applicable/Not Applicable] (if<br />
applicable, give details)<br />
[Applicable/Not Applicable] (if<br />
applicable, give details)<br />
Subscription of the Notes: [Applicable/Not Applicable] (if<br />
applicable, give details, including the<br />
date and the material features of the<br />
underwriting agreements, including the<br />
quotas and the overall amount of the<br />
underwriting commission and of the<br />
placing commission)<br />
Intermediaries in Secondary Trading: [Applicable/Not Applicable] (if<br />
applicable, give details)<br />
Interests of individual or legal entities who are<br />
participating in the issuance/offer<br />
Other information<br />
[[insert, if necessary: Notification<br />
[Applicable/Not Applicable] (if<br />
applicable, give details)<br />
The Issuer has requested the CSSF to provide the relevant authorities in [the Czech<br />
Republic] [the Slovak Republic] [insert other] with a certificate of approval attesting that this<br />
Prospectus has been drawn up in accordance with the EU Prospectus Directive.]<br />
Purpose of the Final Terms<br />
These Final Terms contain the final terms which are necessary for the issuance of Notes<br />
under the Programme for the Issuance of Notes [[and] for the public offer [in Luxembourg]<br />
[the Czech Republic] [the Slovak Republic].<br />
Responsibility<br />
The Issuer is solely responsible for the information given in these Final Terms. [[Relevant<br />
information given by third person] has been extracted from [insert the sources of<br />
information]. The Issuer confirms that such information has been accurately reproduced and<br />
as far as the Issuer is aware and is able to ascertain from information published by [insert<br />
the sources of information], no facts have been omitted which would render the reproduced<br />
information inaccurate or misleading.]<br />
<strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung<br />
as Issuer<br />
[ANNEX:<br />
[- Issue Specific Risk Factors]<br />
- Consolidated Terms and Conditions of the Notes<br />
[�]<br />
Page 46
General<br />
<strong>DIE</strong> <strong>ERSTE</strong> ÖSTERREICHISCHE SPAR-CASSE PRIVATSTIFTUNG<br />
<strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung ("<strong>ERSTE</strong> Foundation") is a private<br />
foundation under Austrian law and is registered in the Companies Register under FN 72984 f,<br />
Commercial Court Vienna. Its registered office is Friedrichstrasse 10, 1010 Vienna, Austria.<br />
The phone number is +43 50 100 15100.<br />
<strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung is the legal successor to "Erste<br />
oesterreichische <strong>Spar</strong>-<strong>Casse</strong>" founded in 1819 as a savings association.<br />
In 1993, <strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> contributed its entire banking business into<br />
the newly founded subsidiary, "<strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> - Bank<br />
Aktiengesellschaft" ("<strong>DIE</strong> <strong>ERSTE</strong>"), and remained its principal shareholder as the "<strong>DIE</strong><br />
<strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Anteilsverwaltungssparkasse" ("<strong>ERSTE</strong> AVS"). Following<br />
the initial public offering of Erste Bank der oesterreichischen <strong>Spar</strong>kassen AG ("Erste Bank",<br />
the legal predecessor of Erste Group Bank) to which <strong>DIE</strong> <strong>ERSTE</strong> had been previously<br />
renamed, in 1997, the share of <strong>ERSTE</strong> AVS in Erste Bank dropped to below 50%, but <strong>ERSTE</strong><br />
AVS remained the largest shareholder of Erste Bank. In 2003, <strong>ERSTE</strong> AVS was transformed<br />
into a private foundation and the name was changed to "<strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<br />
<strong>Casse</strong> Privatstiftung". It is the direct successor of the savings association founded in 1819.<br />
According to Austrian law, private foundations such as <strong>ERSTE</strong> Foundation are legal entities<br />
to which assets have been allocated whose use, administration and realisation serve a<br />
specific purpose. Private foundations do not have shareholders. <strong>ERSTE</strong> Foundation was<br />
established for an indefinite period of time. In the following cases it shall be liquidated (apart<br />
from the cases specified in the Austrian Private Foundation Act): In the case of material<br />
changes in the legal framework of the property rights of the private foundation itself and its<br />
rights in Erste Group Bank or if the share held by the private foundation in Erste Group Bank<br />
drops below 15% of the voting share capital.<br />
Purpose and Objective of <strong>ERSTE</strong> Foundation<br />
The objectives of <strong>ERSTE</strong> Foundation are laid down in Article 3 of the Foundation Statutes<br />
(<strong>Stiftung</strong>serklärung). Accordingly, the purpose of <strong>ERSTE</strong> Foundation is the promotion of:<br />
a) the notion of savings banks and savings bank matters,<br />
b) the economy and technology,<br />
c) science and art,<br />
d) research,<br />
e) culture and educations,<br />
f) religious organisations,<br />
g) conservation of traditional heritage,<br />
h) the environment,<br />
i) health and welfare services.<br />
Page 47
The purpose is achieved by the following:<br />
a) holding an interest in Erste Group Bank in any type or legal form and guaranteeing current<br />
and future liabilities in the case of insolvency, in the amounts and for the periods defined by<br />
law;<br />
b) holding participating interests in Erste Group Bank and other companies with similar<br />
activities;<br />
c) support of regional and inter-regional measures of Erste Group Bank, also by acquiring<br />
investments;<br />
d) promotion of academic research work in the fields of banking, savings banks, stock<br />
exchange and the capital market matters;<br />
e) ensuring that there are always sufficient funds available for the purposes defined above.<br />
<strong>ERSTE</strong> Foundation is to retain a qualified holding in Erste Group Bank unless other economic<br />
or banking sector considerations require different structural measures.<br />
<strong>ERSTE</strong> Foundation may take up business activities to the extent permitted by law insofar as<br />
these activities do not exceed the scope of an ancillary business.<br />
Business Overview<br />
<strong>ERSTE</strong> Foundation started its business activities in the year 2005 and it based its mission on<br />
the tradition of savings banks which were founded as non-profit companies 190 years ago.<br />
The <strong>ERSTE</strong> Foundation is devoted to unanswered questions of social and ethical coherence,<br />
cultural development and the challenge of the European unification process.<br />
In addition, the <strong>ERSTE</strong> Foundation as the largest single shareholder of Erste Group Bank<br />
secures its individual prospects and is devoted, apart from managing its investments, to<br />
serving the common good with its focus on social development, culture and Europe.<br />
Based on assets on its disposal (which as of 30 September 2011 amounted to EUR<br />
1,522,883,888.04), the <strong>ERSTE</strong> Foundation is one of the largest non-profit foundations in the<br />
German-speaking region:<br />
Name:<br />
Assets in EUR<br />
(rounded, based on financial year 2010)<br />
Robert Bosch <strong>Stiftung</strong> GmbH 5,126,918,000 (B) 2<br />
Dietmar-Hopp-<strong>Stiftung</strong> gGmbH 3,400,000,000 (M) 3<br />
Else Kröner-Fresenius-<strong>Stiftung</strong> 2,900,000,000 (M)<br />
2 (B) = book value<br />
3 (M) = market value<br />
Page 48
Volkswagen<strong>Stiftung</strong> 2,457,544,000 (M)<br />
Baden-Württemberg <strong>Stiftung</strong> gGmbH 2,243,078,000 (B)<br />
Deutsche Bundesstiftung Umwelt 1,986,394,000 (B)<br />
Klaus Tschira <strong>Stiftung</strong> gGmbH 1,960,962,000 (B)<br />
Joachim Herz <strong>Stiftung</strong> 1,300,000,000 (B)<br />
Software AG-<strong>Stiftung</strong> 1,288,170,000 (M)<br />
Alfried Krupp von Bohlen und Halbach-<strong>Stiftung</strong> 1,066,803,000 (B)<br />
Gemeinnützige Hertie-<strong>Stiftung</strong><br />
ZEIT-<strong>Stiftung</strong> Ebelin und Gerd Bucerius<br />
Bertelsmann <strong>Stiftung</strong><br />
Körber-<strong>Stiftung</strong><br />
Fritz Thyssen <strong>Stiftung</strong><br />
886,000,000 (M)<br />
731,764,000 (B)<br />
618,998,000 (B)<br />
515,000,000 (B)<br />
425,269,000 (B)<br />
Source: Bundesverband deutscher <strong>Stiftung</strong>en<br />
http://www.stiftungen.org/fileadmin/bvds/de/News_und_Wissen/Zahlen_und_Daten/Groesste<strong>Stiftung</strong>en_20110525_<br />
VglJahr2010_01.pdf<br />
According to a study by the European Foundation Center ("Foundations in the European<br />
Union, Facts and Figures Report on Work by EFC Research Task Force") in May 2008, the<br />
average spending of the 58,588 non-profit foundations in 14 EU member states is around<br />
EUR 1 million. This significantly distinguishes <strong>ERSTE</strong> Foundation from other foundations also<br />
in relation to spending volume, especially in the CEE/SEE region.<br />
There is frequent cooperation with other large European foundations such as the Robert<br />
Bosch <strong>Stiftung</strong> (Germany), König Baudouin <strong>Stiftung</strong> (Belgium), Compagnia di San Paolo<br />
(Italy). Examples are the European Fund for the Balkans seated in Belgrade, which was<br />
created and is funded and strategically supported by the three above mentioned foundations<br />
jointly with <strong>ERSTE</strong> Foundation as well as the Balkan Fellowship for Journalistic Excellence<br />
which is being offered for the fourth time together with the Robert Bosch <strong>Stiftung</strong> and the<br />
Balkan Investigative Researching Network.<br />
Use of funds<br />
The use of funds of the foundation is as follows in the business years 2009 and 2010 and as<br />
of 30 September 2011:<br />
In EUR thousands<br />
(rounded)<br />
2009 2010<br />
September<br />
2011<br />
Fundings for projects 5,960.4 5,822.0 6,187.9<br />
Project expenses 1,935.0 1,766.1 1,651.4<br />
good.bee 573.0<br />
Page 49
Total fundings &<br />
project expenses<br />
8,468.4 7,588.1 7,839.3<br />
The charitable sphere comprises three categories of payments: Fundings for projects, direct<br />
project expenses and the building of and the investment in adequate organisations which fulfil<br />
the foundation aims through specific tasks. With fundings, funds are provided directly and<br />
charitably to project partners who co-develop and implement projects. The costs for the<br />
development of projects, preparatory workshops, drawing up feasibility studies and research<br />
work are typical direct project costs. Direct project expenses do not contain personnel<br />
expenses but only non-cash benefits and services which are purchased. Good.bee is an<br />
initiative of <strong>ERSTE</strong> Foundation and Erste Group Bank in the area of microfinance and social<br />
entrepreneurs. <strong>ERSTE</strong> Foundations holds 40%, and Erste Group Bank holds 60% in<br />
good.bee Holding. The development and implementation of alternative financial services are<br />
a strategic focus.<br />
In EUR thousands<br />
(rounded)<br />
Investments in fixed<br />
assets<br />
Total investments in<br />
fixed assets<br />
2009 2010 September<br />
2011<br />
637.6 68.3 158.5<br />
637.6 68.3 158.5<br />
Personnel expenses 2,272.7 2,407.4 1,930.1<br />
General<br />
administrative<br />
expenses<br />
Expenses affiliated<br />
company<br />
Total administrative<br />
expenses<br />
1,975.6 2,105.4 1,900.0<br />
36.1<br />
4,248.3 4,512.8 3,866.2<br />
The predominant part of the personnel and general administrative expenses are indirect<br />
project expenses. They also comprise all employees which directly co-develop, evaluate,<br />
prepare, select, control and accompany the projects.<br />
Net interest income<br />
and taxes<br />
Non-profit activities<br />
-49,295.4 -54,322.3 -32,972.5<br />
Between 12% and 15% of the income earned from investments of <strong>ERSTE</strong> Foundation are<br />
invested in non-profit projects developed by <strong>ERSTE</strong> Foundation and its partners.<br />
Page 50
The development objective of <strong>ERSTE</strong> Foundation is to position its three areas of focus –<br />
social development, culture and Europe – by carrying out large, sustainable projects in<br />
Central and Eastern Europe as well as to significantly enlarge its scope of activities. In the<br />
limelight are initiatives and projects that help to improve the quality of how people live<br />
together in the region, promote a conception of cultural openness, and projects that aim to<br />
reinforce the European unification process in the region.<br />
In the year 2009, some EUR 6.0 million were spent for a total of 125 projects, and direct<br />
project expenses(research, preparation, creation of a network) were just like in 2008 nearly<br />
EUR 2.0 million. In the year 2010, some EUR 5.8 million were spent on a total of 167 projects<br />
and EUR 1.8 million to cover direct project expenses.<br />
Overall, the foundation pursues a focused strategy, which is also shown by the fact that<br />
mostly between 50% and 80% of the funds available in a programme are used for the five<br />
largest projects.<br />
Programme "Social Development"<br />
<strong>ERSTE</strong> Foundation promotes the development of an integrated society in Europe in which all<br />
people are free and willing to assume responsibility for the common good. The social<br />
commitment of <strong>ERSTE</strong> Foundation is based on the idea that living together in a modern<br />
society is challenged by enormous tasks and that in order to achieve “success” by a<br />
European measure one has to effectively employ the intellectual, economic, cultural and<br />
social capital in the efforts to further social integration in Europe.<br />
The list below shows the five largest projects of the "Social development" programme (ranked<br />
by fundings) in 2009 (in total 73% of the approved funds under the programme):<br />
� Award for Social Integration 2011<br />
� KomenskýFond Lernen furs Leben 09/10 (KomenskýFond Learning for Life 09/10)<br />
� KomenskýFond Phase 09/10 CEE<br />
� The <strong>ERSTE</strong> Foundation Ashoka Fellowship Programme<br />
� Equal opportunities<br />
The list below shows the five largest projects of the "Social development" programme (ranked<br />
by fundings) in 2010 (in total 52% of the approved funds under the programme):<br />
� KomenskýFond Inland (KomenskýFund home country)<br />
� KomenskýFond CEE<br />
� Social Research Fellowship 2010 - 2011<br />
� European Fund for the Balkans<br />
� Network of Day Care Centres for Children with Disability in the Republic of Moldova<br />
Programme “Culture”<br />
The focus of the cultural programme is the mutual exchange, communication and respect for<br />
the different historical experiences and requirements. Strengthening local initiatives and the<br />
integration of people that contribute their knowledge and history from the perspective of<br />
Central and Eastern Europe is essential. Special attention is devoted to the processing of<br />
structures of the past and their relation to the present as well as the treatment of art and<br />
culture in the formerly Communist countries. The lack of intellectual debate, publications and<br />
discourse is a problem repeatedly addressed in countries in which <strong>ERSTE</strong> Foundation is<br />
active. The programme is based on the special opportunity created by art to clearly reveal<br />
social and cultural developments and to open new perspectives.<br />
Page 51
The list below shows the five largest projects of the "Culture" programme (ranked by<br />
fundings) in 2009 (in total 77% of the approved funds under the programme):<br />
� PATTERNS Lecture Set Fortsetzung<br />
� tranzit.sk 2010<br />
� tranzit.cz 2010<br />
� tranzit.hu 2010<br />
� PATTERNS Lecture Set Fortsetzung/CALL<br />
The list below shows the five largest projects of the "Culture" programme (ranked by<br />
fundings) in 2010 (in total 75% of the approved funds under the programme):<br />
� transit.at<br />
� Igor Zabel<br />
� Paul Celan Fellowships for Translators 2011/12<br />
� ARCHIS SEE Network 2010<br />
� Gender Check<br />
Programme “Europe”<br />
<strong>ERSTE</strong> Foundation supports the European unification process in Central and Eastern Europe<br />
and attempts actively support existing enlargement initiatives. <strong>ERSTE</strong> Foundation plans to<br />
encourage the spread of European values in the region: Avoid prejudices, overcome<br />
nationalism and to think and live across borders.<br />
The list below shows the five largest projects of the "Culture" programme (ranked by<br />
fundings) in 2009 (in total 89% of the approved funds under the programme):<br />
� aces 3 - Academy of Central European Schools: Follow-up 2009/<br />
� Europäische Transformation und Erweiterung (European Transformation and<br />
Expansion)<br />
� Balkan Fellowship for Journalistic Excellence 3rd generation<br />
� Balkan Fellowship for Journalistic Excellence 4th generation<br />
� aces 2_1 – Academy of Central European Schools<br />
The list below shows the five largest projects of the "Europe" programme (ranked by<br />
fundings) in 2010 (in total 93% of the approved funds under the programme):<br />
� Aces - Academy of Central European Schools<br />
� Europäische Transformation und Erweiterung, 3. Teil (European Transformation and<br />
Expansion, 3 rd part)<br />
� European Fund for the Balkans<br />
� United World College Mostar – Scholarship for two Bosnian Students<br />
� ARCHIS SEE Network 2010<br />
Description of current projects (selection from over 548 individual projects)<br />
One of the first projects of <strong>ERSTE</strong> Foundation is “Zweite <strong>Spar</strong>kasse” (Second Savings Bank).<br />
This bank offers accounts free of charge to “people without a bank” that are not granted<br />
Page 52
financial services by other banks due to debts. This help to self-help is supported actively by<br />
partner organisations such as Caritas, debt councillors and various self-help groups (among<br />
other things for persons with addictions, ex-prisoners, anonymous gamblers, etc.) and has the<br />
aim of helping these persons find their way back to a regular financial life.<br />
In 12 countries of Central and Eastern Europe, the <strong>ERSTE</strong> Foundation Award for Social<br />
Integration is presented every two years for projects that have developed and implemented<br />
particularly innovative concepts for social integration. During the first call in 2007, 400<br />
applications have been received from the organisations of the 4 participating countries<br />
(Bosnia and Herzegovina, Croatia, Slovenia and Serbia), while in 2011, there were more than<br />
4 times as many: 1,850 applications from 12 participating countries (Bosnia and Herzegovina,<br />
Croatia, the Czech Republic, Hungary, Kosovo, Macedonia, Moldova, Montenegro, Romania,<br />
Serbia, the Slovak Republic and Slovenia). Apart from the cash award, the 30 winners<br />
received support for the public presentation of their activities.<br />
Gender roles in East European Art are investigated in the exhibition "Gender Check” that was<br />
open for viewing in 2009/2010 at the Museum of Modern Art <strong>Stiftung</strong> Ludwig Vienna<br />
(MUMOK) and in 2010 at Zacheta Gallery in Warsaw. <strong>ERSTE</strong> Foundation supported the<br />
exhibition and, in particular, also enabled the advance research work. The theme is the topic<br />
of the largest exhibition ever held at MUMOK for the first time to this extent (over 200 artists<br />
from 24 countries with over 400 works of art).<br />
The Academy of Central European Schools (ACES) is an international network of schools that<br />
has the purpose of raising the understanding among young people in Europe and its<br />
democratic values as well as an understanding for the cultures of other countries. This is one<br />
of the major projects of <strong>ERSTE</strong> Foundation running since 2007, involving 275 schools and<br />
ministries from 15 countries.<br />
Within the scope of the Balkan Fellowship for Journalistic Excellence, each year ten<br />
experienced journalists from Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo,<br />
Macedonia, Montenegro, Romania and Serbia will be supported by work and travel<br />
scholarships and will receive special training courses for further education. This measure is<br />
intended to raise the quality of media reports and in this manner freedom of opinion in the<br />
countries of the Balkan region.<br />
Administration of shareholdings<br />
The Foundation Statutes (<strong>Stiftung</strong>serklärung) define a permanent and qualified investment in<br />
Erste Group Bank as a purpose of the <strong>ERSTE</strong> Foundation. All types of rights of disposal over<br />
the shares in Erste Group Bank – specifically, sale, pledging of shares or assignment of<br />
subscription rights – require the approval of the Supervisory Board. The Foundation Statutes<br />
specify for the management of <strong>ERSTE</strong> Foundation’s assets that the investment in Erste<br />
Group Bank shall be retained to the extent it is economically feasible. The <strong>ERSTE</strong> Foundation<br />
is to be dissolved if the shareholding held in Erste Group Bank drops below 15%.<br />
Participations<br />
<strong>ERSTE</strong> Foundation currently controls 25.63% of the ordinary shares of Erste Group Bank and<br />
is therefore the largest principal shareholder of Erste Group Bank. In its enlarged home<br />
market in Central and Eastern Europe, which includes the Czech Republic, Romania, the<br />
Slovak Republic, Hungary, Croatia, Serbia and the Ukraine, Erste Group (i.e., Erste Group<br />
Bank and its subsidiaries and affiliated companies as a whole) is one of the leading banking<br />
groups in the retail business. As of 30 September 2011, Erste Group had some 17.2 million<br />
customers and total assets of EUR 216.1 billion on a consolidated basis. As of 30 September<br />
2011 Erste Group employed 50,901 persons in its network of over 3,200 branch offices<br />
worldwide.<br />
Page 53
<strong>ERSTE</strong> Foundation's Management Board has to pass a resolution in a timely manner<br />
regarding the exercise of any shareholders rights in general shareholders’ meetings. Its<br />
resolution on the exercise of shareholder rights shall require the approval of the Supervisory<br />
Board. The resolution on the exercise of shareholder rights shall be possible within a<br />
shortened period of time if according to the articles of association of Erste Group Bank an<br />
extraordinary general meeting has been convened on short notice. In the case of an imminent<br />
threat, especially if it is not possible to obtain a resolution of the Supervisory Board in time,<br />
the Management Board decides on the exercise of shareholders’ rights autonomously. It must<br />
immediately report to the Supervisory Board on this fact.<br />
Since 2009, <strong>ERSTE</strong> Foundation has held a share of 40% in good.bee Holding GmbH. The<br />
purpose of good.bee Holding GmbH is to provide financial services to customers in remote<br />
areas and to social groups that do not have access or only restricted access to banking<br />
services in Romania.<br />
In 2011, <strong>Spar</strong>kassen Beteiligungs GmbH & Co KG ("SBKG") has been established in Vienna<br />
as a limited partnership for the purpose of holding and administrating all or part of the<br />
shareholdings in Erste Group Bank which have been contributed to it. <strong>Spar</strong>kassen<br />
Beteiligungs GmbH, a wholly owned subsidiary of <strong>ERSTE</strong> Foundation, is the general partner<br />
of SBKG. <strong>ERSTE</strong> Foundation, Allgemeine <strong>Spar</strong>kasse Oberösterreich Bankaktiengesellschaft<br />
and Kärntner <strong>Spar</strong>kasse Aktiengesellschaft are the limited partners of SBKG. In the course of<br />
the establishment of SBKG, Kärntner <strong>Spar</strong>kasse Aktiengesellschaft contributed 850,000<br />
shares and <strong>ERSTE</strong> Foundation contributed 3.2 million shares in Erste Group Bank to SBKG,<br />
whereas Allgemeine <strong>Spar</strong>kasse Oberösterreich Bankaktiengesellschaft contributed cash to be<br />
used by SBKG to purchase 2.3 million shares in Erste Group Bank to SBKG. According to the<br />
articles of association of SBKG, <strong>ERSTE</strong> Foundation has sole (indirect) control over the<br />
management of SBKG and in particular with regard to the voting rights attached to the shares<br />
in Erste Group: Only the general partner <strong>Spar</strong>kassen Beteiligungs GmbH, which is wholly<br />
owned and controlled by <strong>ERSTE</strong> Foundation, may represent and manage SBKG, and two<br />
members of the management board of SBKG (which in total comprises four members) are<br />
appointed by <strong>ERSTE</strong> Foundation. Exercising voting rights in the shareholder's meeting of<br />
Erste Group Bank as well as subscribing new shares in Erste Group Bank are solely to be<br />
decided by the general partner <strong>Spar</strong>kassen Beteiligungs GmbH, and only the two members of<br />
the management board appointed by <strong>ERSTE</strong> Foundation (and thus controlled by the Issuer)<br />
may represent SBKG in the shareholders' meeting of Erste Group Bank.<br />
Foundation net assets and fundings (distributions)<br />
The beneficiaries of <strong>ERSTE</strong> Foundation are legal entities belonging to the group of non-profit,<br />
charitable and religious organisations as defined in the provisions of the Austrian Federal Tax<br />
Procedure Act, as amended. The law does not permit the inclusion of non-profit residential<br />
construction companies in this group of beneficiaries. Beneficiaries who no longer state as<br />
their objectives non-profit, charitable or religious purposes are to be deleted from the group of<br />
beneficiaries. The beneficiaries and the contribution amounts are decided by <strong>ERSTE</strong><br />
Foundation’s Management Board in accordance with the Foundation Statutes and the<br />
detailed provisions of its by-laws. Fundings (distributions) to beneficiaries are only permitted to<br />
be funded from the revenues of <strong>ERSTE</strong> Foundation.<br />
In the event of dissolution of <strong>ERSTE</strong> Foundation, the remaining assets of the foundation are<br />
to be transferred to the final beneficiaries. The final beneficiaries must use the assets for<br />
purposes that promote the common good. The foundation’s Management Board shall appoint<br />
one or more final beneficiaries whose activities consist of the performance of the same or<br />
similar objectives as <strong>ERSTE</strong> Foundation.<br />
According to the Foundation Statutes, <strong>ERSTE</strong> Foundation must retain the investment in Erste<br />
Group Bank, and therefore, in the event of any capital increase of Erste Bank it must exercise<br />
its subscription rights in accordance with its possibilities; reserves must be put aside for future<br />
capital increases.<br />
Page 54
In the case that funds will be required to retain the shareholding or for foreseeable capital<br />
increases in Erste Group Bank, <strong>ERSTE</strong> Foundation must refrain from any fundings according<br />
to the Foundation Statutes.<br />
Funds shall be made available for fundings in accordance with the Foundation Statutes. The<br />
Management Board shall ensure that any fundings paid out do not diminish any claims of<br />
creditors against <strong>ERSTE</strong> Foundation.<br />
The foundation net assets (consisting of capital and revenue reserves) of <strong>ERSTE</strong> Foundation<br />
amounted to (excluding hidden reserves) EUR 282,931,679.16 as of 31 December 2010 and<br />
EUR 272,656,023.81 as of 31 December 2009. The foundation net assets therefore increased<br />
in 2010 by some EUR 10.3 million. This change results from the appropriation to free<br />
reserves from the net profit 2010 of EUR 16,097,679.83, and on the other hand from fundings<br />
to beneficiaries from free reserves of EUR 5,822,024.48.<br />
Investments in fixed assets<br />
In 2010, investments in the amount of EUR 0.1 million refer mainly to the furnishings for the<br />
new office of the <strong>ERSTE</strong> Foundation (EUR 0.03 million) and for further development of the<br />
project database (EUR 0.04 million). Until 30 September 2011, the <strong>ERSTE</strong> Foundation<br />
invested 0.2 million in fixed assets, whereas 0.1 million were used for its brand, 0.02 million<br />
were used for its website and 0.03 million were used for its databases. Investments of EUR<br />
0.4 million in total are expected for 2011, whereas 0.2 million are to be used for the brand.<br />
Investments of further EUR 0.3 million are planned for 2012.<br />
Investments in financial assets<br />
In 2010 the equity interest in Erste Group Bank decreased approximately in the amount of<br />
EUR 76 million to EUR 1,393.6 million through the sale of 3 million shares. The equity interest<br />
in good.bee Holding GmbH remained unchanged at EUR 2.1 million. Furthermore, <strong>ERSTE</strong><br />
Foundation invested EUR 17.2 million in shares and other variable-yield securities. Until 30<br />
September 2011, <strong>ERSTE</strong> Foundation sold 2.3 million and purchased 0.5 million shares in<br />
Erste Group Bank. In addition 3.2 million shares in Erste Group Bank were contributed to the<br />
limited partnership SBKG (as defined above) which is reported in the balance sheet item<br />
"Shares in Group companies". As of 30 September 2011, <strong>ERSTE</strong> Foundation owns<br />
90.659.034 shares in Erste Group Bank in the amount of EUR 1,243.9 million.<br />
Trend information<br />
In 2011, the Erste Foundation kept the level of funding and intensified the work in terms of<br />
depth and quality focussed on “leading projects” (on the website called “factory projects”) and<br />
organic development of the identified topics. The budget proposed to the Supervisory Board<br />
for project fundings amounts to EUR 8.5 million for 2012, ie the same amount as in 2011.<br />
Until 30 September 2010, the <strong>ERSTE</strong> Foundation sold 1.9 million shares of Erste Group Bank<br />
into the market and reduced its investment in Erste Group Bank to 25.59%. The proceeds of<br />
this sale (approximately EUR 56 million) will be used for repayment of debt and hence a<br />
reduction of the liabilities of <strong>ERSTE</strong> Foundation.<br />
The Issuer is not aware of any material circumstances apart from the information contained in<br />
this Prospectus that would likely have a material effect on the Issuer's prospects for the<br />
current financial year.<br />
Deferred taxes<br />
In 2003, in the course of the transformation of <strong>ERSTE</strong> AVS into a private foundation, the<br />
taxation of the difference between the tax base of the Erste Bank (now: Erste Group Bank)<br />
shares and the fair value of these shares was deferred until disposal of such shares. This<br />
Page 55
difference relating to 76.2 million shares amounted to EUR 564 million on 31 December 2010.<br />
It will be taxed upon a disposal of the shares at a standard rate of 25%, independent from the<br />
actual capital gains. Existing loss carry forwards, as of 31 December 2010 amounting to some<br />
EUR 162 million, may be used to reduce these taxable profits.<br />
Recent developments<br />
Extract from Erste Group Bank's investors information dated 10 October 2011 on CDS<br />
portfolio, Hungarian and Romanian operations, and effective interest rate method<br />
On 10 October 2011, Erste Group Bank released an Ad hoc notice on the decision of its<br />
management board dated 10 October 2011 on a number of measures that affect the<br />
presentation of its CDS portfolio, its Hungarian and Romanian operations, and result in the<br />
uniform application of the effective interest rate method across the Erste Group.<br />
� Erste Group has cut its sovereign exposure to Greece, Portugal, Spain, Ireland and<br />
Italy from EUR 1.9 billion at year-end 2010 to EUR 0.6 billion at 30 September 2011.<br />
95% of this exposure is marked to market as at 30 September 2011. At the same<br />
time the combined sovereign exposure to Greece and Portugal declined to about<br />
EUR 10 million. In addition, Erste Group changes the presentation of its Credit<br />
Default Swap ("CDS") portfolio (protection sold) from amortised cost to market values,<br />
leading to a one-off cumulative charge against shareholders’ equity of<br />
EUR 280 million for the years prior to 2011. The impact on the January to<br />
September 2011 income statement (profit and loss account) amounts to<br />
approximately EUR 180 million (post-tax).<br />
� Erste Group will write down its entire Hungary-related goodwill in the amount of<br />
EUR 312 million pre-tax (EUR 312 million post-tax). Furthermore, Erste Group will<br />
take charges for additional risk provisions totalling EUR 450 million pre-tax<br />
(EUR 450 million post-tax). This is due to unprecedented government intervention in<br />
the Hungarian banking market, an increase in the target Non Performing Loan<br />
("NPL") coverage ratio and a deterioration in asset quality. The goodwill impairment<br />
does not impact regulatory capital or tangible equity.<br />
� Erste Group will partially write down its Romania-related goodwill by EUR 700 million<br />
pre-tax (EUR 627 million post-tax) to reflect the slower than expected economic<br />
recovery. This measure does not impact regulatory capital or tangible equity.<br />
Following a successful buyout of the minority shareholders – as announced Ad hoc<br />
on 14 September 2011 – the remaining goodwill will be supported by a substantially<br />
larger share of BCR's cash flow.<br />
� In anticipation of IFRS 9 implementation, Erste Group will align the effective interest<br />
rate models used across Erste Group, leading to a cumulative one-off charge against<br />
shareholders’ equity of approximately EUR 210 million, as a result of recognising<br />
income over the life of a loan, rather than at the time of payment. This amount will be<br />
recouped through the income statement over the life of the loans. The impact on the<br />
January to September 2011 income statement is approximately EUR 10 million (posttax).<br />
� Based on the above, Erste Group is set to report a net loss of approximately<br />
EUR 920 to 970 million in January to September 2011. Adjusted for extraordinary<br />
charges (excluding the banking taxes in Austria and Hungary) Erste Group expects to<br />
post a net profit of about EUR 700 million in January to September 2011.<br />
� In response to the significantly deteriorated outlook for the Euro-zone economies and<br />
as a precautionary measure Erste Group will postpone the early repayment of the<br />
state portion of the participation capital (EUR 1.2 billion) by at least one year. The<br />
management board of Erste Group will propose to the annual general meeting<br />
Page 56
("AGM") not to pay a dividend for the financial year 2011 but to continue servicing<br />
participation capital.<br />
The above measures of Erste Group Bank are intended to address material issues: Erste<br />
Bank Hungary will be repositioned with a view to establish a bank that is more resilient to<br />
political event risk. The reduction of CDS and Euro-zone peripheral exposures is designed to<br />
reduce temporary income statement volatility. And, the acquisition of further shares in BCR is<br />
set to improve Erste Group's position in one of its key markets.<br />
In the view of <strong>ERSTE</strong> Foundation, a loss of dividends from Erste Group Bank for the financial<br />
year 2011 would have a negative impact on the profit situation of <strong>ERSTE</strong> Foundation for the<br />
current year. However, given the liquidity and assets, <strong>ERSTE</strong> Foundation is able to render all<br />
payments due under the Notes.<br />
On Erste Group Bank's ad hoc information dated 27 October 2011 on additional capital<br />
requirements<br />
In connection with the sovereign debt crisis, the European Banking Authority (EBA)<br />
conducted a preliminary assessment of European banks' capital requirements. A core tier 1<br />
ratio of 9% (as per the stress test definition) was set as benchmark, and all EEA sovereign<br />
exposures are marked-to-market. The 9% will have to be met by 30 June 2012.<br />
According to this preliminary calculation of EBA, Erste Group Bank requires additional capital<br />
amounting to EUR 59 million. This result was calculated using half-year 2011 data. The final<br />
result is expected to be determined by the EBA based on financial statements as of the end of<br />
the third quarter, thus taking into account the measures recently announced by Erste Group<br />
Bank.<br />
The Core tier 1 ratio is calculated using EBA methodology and estimates and includes the<br />
participation capital provided by the Republic of Austria in the amount of EUR 1,224 million,<br />
but neither the hybrid capital nor participation capital provided by private investors in the<br />
amount of EUR 540 million.<br />
Page 57
ADMINISTRATIVE, MANAGING AND SUPERVISORY BO<strong>DIE</strong>S OF <strong>ERSTE</strong> FOUNDATION<br />
Management Board<br />
Chairman<br />
Andreas Treichl<br />
Other positions:<br />
SB 4 Chairman Banca Comercială Română SA<br />
SB Vice Chairman DONAU Versicherung AG Vienna Insurance<br />
Group<br />
SB Chairman Erste Bank der oesterreichischen <strong>Spar</strong>kassen AG<br />
SB Chairman MAK-Österreichisches Museum für angewandte<br />
Kunst<br />
SB Chairman <strong>Spar</strong>kassen Versicherung AG Vienna Insurance<br />
Group<br />
Chairman of MB 5 Erste Group Bank AG<br />
Chairman of MB Felima Privatstiftung<br />
Chairman of MB Ferdima Privatstiftung<br />
Member of Advisory Board good.bee Holding GmbH<br />
Vice Chairman of Advisory Board Haftungsverbund GmbH<br />
Member<br />
Rupert Dollinger<br />
Other positions:<br />
Chairman Career Center Vienna University of Economics<br />
and Business<br />
Member<br />
Theodora Eberle<br />
Other positions:<br />
Chairman of the MB Verein “Bauern helfen Bauern”<br />
Vice Chairman of the MB International Catholic Legislators Network<br />
4 "SB" means Supervisory Board<br />
5 "MB" means Management Board<br />
Page 58
Member<br />
Boris Marte<br />
Other positions:<br />
Member of the Board of Directors NEF - Network of European Foundations;<br />
Brussels<br />
Member of the University Advisory Council Universitätsrat der Akademie der bildenden<br />
Künste Wien<br />
Member of the Foundation Advisory Board <strong>Stiftung</strong>srat der Österreichischen Ludwig-<br />
<strong>Stiftung</strong>; Wien<br />
Vice Chairman of the MB Verein "Österreichisches Filmmuseum"<br />
Member of the MB Verein “Architekturzentrum Wien”<br />
Member<br />
Richard Wolf<br />
Other positions:<br />
SB Chairman ASSET ONE Immobilienentwicklungs AG<br />
SB Member Bene AG<br />
Member of the MB Ea Einhundertste WT Holding GmbH<br />
Member of the MB Pa-Dreizehnte WTP Beteiligungsverwaltungs<br />
GmbH<br />
Chairman of MB Wolfgang Rosam Privatstiftung<br />
Member of the MB WOLF THEISS Rechtsanwälte GmbH<br />
The address of the members of the foundation’s Management Board is Friedrichstraße 10,<br />
1010 Vienna.<br />
The foundation’s Management Board presently consists of five, according to the Foundation<br />
Statutes at least three or as a maximum five members. The members of <strong>ERSTE</strong> Foundation’s<br />
Management Board are appointed by the Supervisory Board for a certain period of time,<br />
specifically for a period of office of at least one year and at the most five years.<br />
If the Supervisory Board fails to comply with the obligation to appoint lacking members of the<br />
foundation’s Management Board to such an extent that its required capacity to conduct<br />
business or act as representative is not given, then the appointment shall be done by the<br />
court pursuant to Art. 27 par. 1 of the Austrian Private Foundation Act. The period of office of<br />
a member appointed by the court is at the most eighteen months but shall end before this<br />
term if the Supervisory Board makes up for this lack and effects the appointments.<br />
When the right of appointment transfers to the court, every member of the foundation’s<br />
Management Board may and should submit proposals to the court for the appointment of<br />
members to the foundation's Management Board.<br />
Only persons may be appointed as members to the foundation’s Management Board that are<br />
also members of the Association or members of the Management Board of Erste Group Bank.<br />
Page 59
At least one member of the foundation’s Management Board should be a member of the<br />
Management Board of Erste Group Bank.<br />
The foundation's Management Board shall be autonomously responsible for the management<br />
of <strong>ERSTE</strong> Foundation. The external representation of <strong>ERSTE</strong> Foundation shall be done<br />
jointly by two members of the foundation’s Management Board of which one shall be the<br />
chairman or vice chairman.<br />
The foundation's Management Board shall regularly report to the Supervisory Board on the<br />
course of business and situation of <strong>ERSTE</strong> Foundation; the chairman of the Supervisory<br />
Board shall be sent a written or oral report without delay in the case of any important events.<br />
The foundation's Management Board shall report to the Supervisory Board at every meeting<br />
and to the general assembly once a year of any fundings paid out.<br />
Supervisory Board<br />
Chairman 6<br />
Georg Winckler<br />
Vice Chairman<br />
Georg Winckler<br />
Other positions:<br />
SB Chairman Austria Versicherungsverein auf Gegenseitigkeit<br />
Privatstiftung<br />
SB Vice Chairman Erste Group Bank AG<br />
SB Member Innovationszentrum Universität Wien GmbH<br />
SB Vice Chairman UNIQA Versicherungen AG<br />
Member of the Board of Trustees Educational Testing Service (ETS),<br />
Princeton/New Jersey<br />
Member of the foundation’s MB Wenckheim Privatstiftung<br />
Member<br />
Dietrich Blahut<br />
Other positions:<br />
SB Member Austria Versicherungsverein auf Gegenseitigkeit<br />
6 As of the date of the Prospectus the vice chairman Georg Winckler has assumed the<br />
position of a temporary chairman of the <strong>ERSTE</strong> Foundation, as on 4 November 2011 Karl<br />
Korinek (former chairman) has resigned from his position as chairman. A new chairman will<br />
be appointed by the members of the Supervisory Board on or about 12 December 2011.<br />
Page 60
Member<br />
Maximilian Hardegg<br />
Privatstiftung.<br />
Other positions:<br />
SB Member Česká spořitelna, a.s.<br />
Member of the MB DLG e.V. Frankfurt, Deutschland<br />
Member of the MB HAT GmbH<br />
Member<br />
Heinz Kessler<br />
Other positions:<br />
SB Vice Chairman Austria Versicherungsverein auf Gegenseitigkeit<br />
Privatstiftung<br />
SB Vice Chairman Česká spořitelna, a.s.<br />
SB Vice Chairman Erste Bank der oesterreichischen <strong>Spar</strong>kassen<br />
AG<br />
SB Chairman Erste Group Bank AG<br />
SB Chairman Nettingsdorfer Papierfabrik Management AG<br />
SB Chairman Rath Aktiengesellschaft<br />
SB Chairman Reform-Werke Bauer & Co Gesellschaft m.b.H<br />
SB Chairman Reform-Werke Bauer & Co Holding<br />
Aktiengesellschaft<br />
Member of the Nomination Committee and<br />
Chairman of the General Assembly<br />
Member<br />
Peter Mitterbauer<br />
Other positions:<br />
SB Member Andritz AG<br />
<strong>Spar</strong>kassen-Prüfungsverband<br />
SB Chairman Österreichische<br />
Forschungsförderungsgesellschaft mbH<br />
SB Member Oberbank AG<br />
SB Chairman Österreichische Industrieholding AG (ÖIAG)<br />
SB Vice Chairman Prinzhorn Holding GmbH<br />
SB Member Rheinmetall AG<br />
SB Member Teufelberger Holding AG<br />
Page 61
Chairman of MB Miba AG<br />
MB Member Mitterbauer Beteiligungs-Aktiengesellschaft<br />
Member<br />
Johanna Rachinger<br />
Other positions:<br />
General Director Oesterreichische Nationalbibliothek<br />
Member<br />
Bernhard Kainz<br />
Other positions:<br />
SB Member Berufsförderungsinstitut Wien<br />
SB Member Erste Bank der oesterreichischen <strong>Spar</strong>kassen<br />
AG<br />
Chairman of the Works Council Erste Bank der oesterreichischen <strong>Spar</strong>kassen<br />
AG<br />
Member of the European Works Council Erste Group Bank AG<br />
Vice Chairman Gewerkschaft der Privatangestellten, Druck<br />
Journalismus, Papier, Wien<br />
Councillor of the Chamber (Kammerrat) Arbeiterkammer Wien<br />
Member<br />
Friedrich Lackner<br />
Other positions:<br />
SB Member Erste Group Bank AG<br />
Chairman of the Board of Directors of the<br />
European Works Council<br />
Erste Group Bank AG<br />
Chairman of the Works Council Erste Group Bank AG<br />
The address of the members of the Supervisory Board is Friedrichstraße 10, 1010 Vienna.<br />
The Supervisory Board currently consists of eight, and pursuant to the Foundation Statutes,<br />
of at least four but at the most ten members. The members of the Supervisory Board are<br />
appointed for a limited period of time, but at the maximum for five years by election.<br />
The members of the Supervisory Board are elected by general assembly of the Association.<br />
The members of the Supervisory Board must be members of the Association except for the<br />
member that is delegated from the group of the works council of Erste Group Bank and the<br />
member that comes from the group works council of Erste Bank der oesterreichischen<br />
Page 62
<strong>Spar</strong>kassen AG, with the procedure in such case being that the respective works council may<br />
propose to the general assembly of the Association a candidate for the election of the works<br />
council member in the Supervisory Board. This regulation shall apply also to the works<br />
councils of any universal successors of the companies mentioned.<br />
Pursuant to the Foundation Statutes and the rules of business, the Supervisory Board shall<br />
have the following tasks<br />
a) supervision of the Management Board and of the accounting practices of <strong>ERSTE</strong><br />
Foundation;<br />
b) the appointment and recall of members of the foundation's Management Board including<br />
proposals for the chairman and the vice chairman of the foundation's Management Board;<br />
c) the passing of resolutions on measures requiring approval (see below);<br />
d) the approval of the by-laws of the foundation’s Management Board and of the advisory<br />
boards;<br />
e) representation of the private foundation when conducting legally binding transactions with<br />
members of the foundation's Management Board;<br />
f) fixing the amount of the remuneration of the members of the foundation’s Management<br />
Board;<br />
g) appointment of auditors of the foundation for the event that the audit agency of the<br />
<strong>Spar</strong>kassen-Prüfungsverband is no longer the statutory prescribed auditor for the foundation;<br />
h) enforcing claims for compensation against members of the foundation's Management<br />
Board;<br />
i) dealing with the audit reports of the foundation auditors;<br />
j) adoption of the audited annual financial statements, approval of the report of the<br />
Management Board and resolution on the use of the net profit and release from liability of the<br />
members of the foundation's Management Board;<br />
k) all other tasks for which the Supervisory Board is responsible under the provisions of the<br />
Austrian Private Foundation Act.<br />
(2) The Supervisory Board shall have the right to do the following:<br />
a) take part in the meeting of the advisory boards;<br />
b) convene a meeting of the foundation’s Management Board indicating the items of the<br />
agenda;<br />
c) inspect the books and other documents of the private foundation at any time and request<br />
explanations and reports from the foundation’s Management Board;<br />
d) request a special audit by an independent auditor or by the audit agency of <strong>Spar</strong>kassen-<br />
Prüfungsverband and to withdraw the appointment of members of the bodies of the<br />
foundation.<br />
The management actions and the resolutions listed below require a simple majority of the<br />
votes in the Supervisory Board:<br />
Page 63
a) all rights of disposal over the shareholdings in Erste Group Bank such as the pledging of or<br />
selling of shares as well as the waiver of subscription rights;<br />
b) investment of funds of the private foundation by buying shares in other companies, namely<br />
such companies that conduct banking business;<br />
c) exercising the rights related to the investment in Erste Group Bank and in other companies<br />
(pursuant to lit. b);<br />
d) the purchase, liens and sale of property;<br />
e) investments that exceed certain purchase costs defined by resolution of the Supervisory<br />
Board in individual cases and in total in one financial year;<br />
f) issuing bonds, granting loans and credit that exceed in individual cases EUR 3,000,000 and<br />
in the respective financial year a total EUR 5,000,000;<br />
g) the granting of loans and credit insofar as these do not belong to regular business<br />
operations;<br />
h) defining the rules of business for itself and for the advisory boards;<br />
i) individual fundings to beneficiaries in amounts that exceed the limit for a calendar year<br />
defined by the Supervisory Board;<br />
j) all measures and dealings that are not part of regular business operations of the private<br />
foundation.<br />
The management actions and the resolutions listed below require a majority of two-thirds of<br />
the votes cast in the Supervisory Board as well as the consent of the general assembly:<br />
a) the general determination of beneficiaries, the determination of the fundings and their<br />
volumes in accordance with the objectives of the foundation and legal provisions (Art. 27a<br />
par. 4 fig. 4 of the Austrian Savings Bank Act) as well as the determination of the final<br />
beneficiary;<br />
b) the exclusion of beneficiaries pursuant to (Art. 27a par. 4 fig. 3 of the Austrian Savings<br />
Bank Act);<br />
c) adding further beneficiaries pursuant to Art. 27a par.4 fig. 3 of the Austrian Savings bank<br />
Act; and<br />
d) a merger of the private foundation with the private foundation being the acquiring entity.<br />
The management measures listed below and the resolutions require the unanimous vote of<br />
the Supervisory Board and furthermore also the approval by the general assembly:<br />
a) a merger of the private foundation as the transferring entity; and<br />
b) the liquidation of the private foundation.<br />
No conflicts of interest<br />
<strong>ERSTE</strong> Foundation does not have any knowledge of conflicts of interest between the<br />
obligations of the members of the Supervisory Board and/or of the foundation’s Management<br />
Board and their private and any other interests.<br />
Foundation’s auditor<br />
Page 64
The foundation’s auditor is the audit agency of the <strong>Spar</strong>kassen-Prüfungsverband. Should the<br />
audit agency cease to exist or if it loses its exclusive competence to audit private foundations<br />
that emerged from the conversion of a Anteilsverwaltungssparkasse, then according to the<br />
Foundation Statutes, the foundation’s auditor shall be appointed by the Supervisory Board.<br />
Association<br />
<strong>ERSTE</strong> Foundation is supported in the pursuit of its objectives by a <strong>Spar</strong>kassenverein<br />
pursuant to the Austrian Savings Bank Act, ie the "Verein - <strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<br />
<strong>Casse</strong> Privatstiftung" (the "Association"). As of 30 September 2011, the Association's<br />
members were 106 independent private individuals and 29 honorary members selected by<br />
the Association.<br />
The general assembly of the Association has the right to change the Foundation Statutes.<br />
The Association’s general assembly has the following tasks with respect to <strong>ERSTE</strong><br />
Foundation:<br />
a) election of the Supervisory Board, and if applicable, the revocation of the election;<br />
b) the basic determination of beneficiaries, the determination of the fundings and their<br />
volumes in accordance with the objectives of the foundation and the legal provisions (Art. 27a<br />
par. 4 fig. 4 of the Austrian Savings Bank Act) as well as the determination of the final<br />
beneficiary;<br />
c) the exclusion of beneficiaries pursuant to Art. 27a par. 4 (3) of the Austrian Savings Bank<br />
Act;<br />
d) adding further beneficiaries pursuant to Art. 27a par.4 (3) of the Austrian Savings bank Act;<br />
e) the merger of <strong>ERSTE</strong> Foundation;<br />
f) the dissolution of <strong>ERSTE</strong> Foundation; and<br />
g) amendments to the Foundation Statutes.<br />
All further rights of the Association and its bodies shall be derived from the Foundation<br />
Statutes, the statutes and the law.<br />
There are no further direct or indirect holdings or controlling interests in the Issuer. <strong>ERSTE</strong><br />
Foundation as a private foundation is not permitted to issue shares; no other participation<br />
securities have been issued. The Issuer has no knowledge of any further agreements whose<br />
effects may result to changes in the controlling interests in the Issuer at a later time.<br />
Page 65
SELECTED FINANCIAL INFORMATION<br />
An English translation of the audited annual financial statements of <strong>ERSTE</strong> Foundation for the<br />
financial years ended on 31 December 2010 and 31 December 2009 with their respective<br />
audit reports are included in this prospectus by way of reference.<br />
Below are excerpts from the English translations of the audited financial statements of<br />
<strong>ERSTE</strong> Foundation for the financial years ended on 31 December 2010 and 31 December<br />
2009:<br />
Profit and Loss Account of <strong>ERSTE</strong> Foundation for the financial years ended on 31<br />
December 2009 and 31 December 2010<br />
For the financial year ended<br />
on 31 December<br />
in EUR millions (rounded)<br />
2009 audited 2010 audited<br />
Net interest income -49.295 -54.322<br />
Income on securities and equity interests 64.128 64.128<br />
Commission income 0.068 0.085<br />
Commission expenses 0.032 0.579<br />
Operating income 14.871 9.343<br />
General administrative expenses 6.183 6.279<br />
Operating expenses 6.346 6.500<br />
Operating results 8.525 2.843<br />
Results from ordinary business activities 8.525 16.649<br />
Taxes on income 0.000 0.551<br />
Annual surplus 8.525 16.098<br />
Movements in reserves 8.525 16.098<br />
Profit for the year 0.000 0.000<br />
Profit brought forward 0.000 0.000<br />
Accumulated profit 0.000 0.000<br />
Balance Sheet of <strong>ERSTE</strong> Foundation as of 31 December 2009 and 31 December 2010<br />
As of 31 December<br />
in EUR millions (rounded) 2009 audited 2010 audited<br />
Assets<br />
Cash in hand and balances with central banks 0.000 0.000<br />
Treasury bills and other bills eligible for refinancing at central banks 0.000 0.000<br />
Loans and advances to credit institution 33.058 290.208<br />
Loans and advances to customers 0.000 0.000<br />
Bonds and other fixed income securities 0.000 0.000<br />
Shares and other variable-yield securities 0.000 17.184<br />
Equity interests 1,471.718 1,395.712<br />
Investments in subsidiaries 0.000 0.000<br />
Intangible assets 0.337 0.255<br />
Tangible assets 0.383 0.313<br />
Own shares 0.000 0.000<br />
Page 66
Other assets 7.132 6.898<br />
Subscribed capital, called but not yet paid in 0.000 0.000<br />
Prepaid expenses 0.000 2.086<br />
Total assets 1,512.628 1,712.655<br />
Liabilities and equity<br />
Amounts owed to credit institutions 1,013.424 906.154<br />
Amounts owed to customers 0.000 0.000<br />
Debts evidence by certificates 200.000 495.000<br />
Other liabilities 24.396 22.335<br />
Deferred income 0.000 0.000<br />
Provisions 2.152 6.235<br />
Subordinate liabilities 0.000 0.000<br />
Supplementary capital 0.000 0.000<br />
Subscribed capital 0.000 0.000<br />
Capital reserves 79.147 79.147<br />
Revenue reserves 193.509 203.784<br />
Accumulated profit 0.000 0.000<br />
Untaxed reserves 0.000 0.000<br />
Total liabilities and equity 1,512.628 1,712.655<br />
The financial year of <strong>ERSTE</strong> Foundation is the calendar year. The audited financial<br />
statements for 2010 have been approved by the Supervisory Board in its meeting on 14 April<br />
2011.<br />
The audited financial statements and the unaudited interim financial statements for the third<br />
quarter year 2011 have been prepared in the German language. English translations of the<br />
audited financial statements and the unaudited interim financial statements for the third<br />
quarter year 2011 are incorporated by reference into this Prospectus.<br />
Audit Reports<br />
English translations of the German language audit reports of the auditors of the annual<br />
financial statements (balance sheet, profit/loss account and notes) as of 31 December 2009<br />
and as of 31 December 2010 are included in this prospectus by reference.<br />
Interim and other financial information<br />
An English version of the unaudited interim financial statements of <strong>ERSTE</strong> Foundation as of<br />
30 September 2011 is included in this prospectus by reference. An extract from the English<br />
translation of the unaudited interim financial statement is given below:<br />
Unaudited Interim Financial Statements for the third quarter of <strong>ERSTE</strong> Foundation as<br />
of 30 September 2011 (compared to 30 September 2010)<br />
As of 30 September Change in %<br />
In EUR thousands (rounded) 2011 2010<br />
Net interest income -32,972 -38,523 -14.4%<br />
Income from securities and equity interests 51,241 48,096 6.5%<br />
Subtotal 18,269 9,573 90.8%<br />
Net fee and commission income -43 -483 -91.1%<br />
Income/expenses from financial transactions -80 38 -310.5%<br />
Other operating income 0 4 -100.0%<br />
Operating income 18,145 9,133 98.7%<br />
Page 67
Personnel expenses -1,930 -1,744 10.7%<br />
Project and general administrative expenses -3,587 -3,517 2.0%<br />
Depreciation/amortization -185 -178 3.9%<br />
Other operating expenses 0 0 -<br />
Operating expenses -5,702 -5,440 4.8%<br />
Operating result 12,443 3,692 237.0%<br />
Value adjustments for securities recognised as financial<br />
assets and for equity interests and shares in Group<br />
companies -17,568 0 -<br />
Income from value adjustments for securities recognized as<br />
financial assets and for equity interests and shares in Group<br />
companies 25,254 6,747 274.3%<br />
Result from ordinary business activity 20,130 10,440 92.8%<br />
Extraordinary result 0 0 -<br />
Taxes on income and earnings and other taxes 0 0 -<br />
Surplus for the period 20,130 10,440 92.8%<br />
Changes to reserves 0 0 -<br />
Profit carryforward 0 0<br />
Accumulated profit 20,130 10,440 92.8%<br />
Unaudited balance sheet of <strong>ERSTE</strong> Foundation as of 30 September 2011 (compared to<br />
31 December 2010)<br />
In EUR thousands (rounded) 30 September 2011 31 December 2010<br />
Assets<br />
Change<br />
in %<br />
Loans and advances to credit institutions 150,441 290,208 -48.2%<br />
a) repayable on demand 30,441 10,208 198.2%<br />
b) other loans and advances 120,000 280,000 -57.1%<br />
Shares and other variable-yield securities 17,184 17,184 -<br />
Equity interests 1,246,041 1,395,712 -10.7%<br />
Investments in subsidiaries 96,601 0 -<br />
Intangible assets 397 255 55.7%<br />
Tangible assets 144 313 -54.0%<br />
Other assets 7,063 6,898 2.4%<br />
Prepaid expenses 5,013 2,086 140.3%<br />
Total assets 1,522,884 1,712,655 -11.1%<br />
Liabilities and equity<br />
Amounts owed to credit institutions 402,000 906,154 -55.6%<br />
Amounts owed to customers 0 0 -<br />
Debts evidenced by certificates 776,926 495,000 57.0%<br />
Other liabilities 45,682 22,335 104.5%<br />
Defferred income 24 0<br />
Provisions 1,378 6,235 -77.9%<br />
Capital reserves 79,147 79,147 0.0%<br />
Page 68
Revenue reserves 197,597 203,784 -3.0%<br />
Retained earnings 20,130 0 -<br />
Total liabilities and equity 1,522,884 1,712,655 -11.1%<br />
Page 69
ADDITIONAL FINANCIAL INFORMATION<br />
Cash flow statement of <strong>ERSTE</strong> Foundation as of 30 September 2011 and the financial<br />
years 2010 and 2009<br />
In EUR thousands (rounded)<br />
3. Q. 2011<br />
(unaudited)<br />
2010 2009<br />
€000 €000 €000<br />
Surplus 20,130 16,098 8,525<br />
+/- Capital gain/Capital loss from the disposal of shares -7,687 -13,806 0<br />
+ Depreciation and amortisation 185 221 162<br />
= Cash flow for the period 12,627 2,513 8,688<br />
+/- Increase in short/long-term accruals -4,856 4,083 515<br />
+/- Increase/Decrease in inventories, accounts receivable<br />
and other assets<br />
-3,092 -1,852 -1,367<br />
+/- Increase/Decrease in accounts payable (excluding<br />
liabilities to bank and bills payable) and other liabilities<br />
23,371 -2,062 -2,480<br />
= Cash inflow/outflow from operating activities 28,051 2,682 5,356<br />
- Payment for tangible and intangible assets -158 -68 -638<br />
+/- Equity investments 0 -17,184<br />
+/- Investments good.bee 0 0 -573<br />
+/- Investments in subsidiaries -96,601 - -<br />
+/- Disposal of shares or other securities 157,357 89,812 0<br />
= Cash inflow for investment activities 60,598 72,560 -1,211<br />
+/- Debts evidenced by certificates 281,926 295,000 0<br />
+/- Repayments/Payments of liabilities to banks -504,154 -107,270 -300<br />
= Cash inflow/outflow from financing activities -222,228 187,730 -300<br />
Fundings (Distributions) -6,188 -5,822 -5,960<br />
Changes in cash and cash equivalents effected by<br />
payments<br />
-139,767 257,150 -2,115<br />
- Cash and cash equivalents at the beginning of the period 290,208 33,058 35,173<br />
+ Cash and cash equivalents at the end of the period 150,441 290,208 33,058<br />
Overall change in cash and cash equivalents -139,767 257,150 -2,115<br />
Page 70
The English translation of the report of the auditors on the audit of the cash flow statements<br />
for the financial year 2010 is included in the English translation of the audited annual financial<br />
statements which is included in this prospectus by reference.<br />
The English translation of the report of the auditors on the audit of the cash flow statements<br />
for the financial year 2009 state:<br />
“We have audited the cash flow statement for the financial year 2009. The cash flow<br />
statement supplement the financial statements of <strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong><br />
Privatstiftung prepared in accordance with the Austrian Commercial Code (UGB) for the year<br />
from 1 January to 31 December 2009.<br />
The preparation and the contents of the cash flow statement for the year from 1 January to 31<br />
December 2009 is the responsibility of the legal representatives. Our responsibility is to<br />
express an audit opinion based on the audit in order to determine whether the cash flow<br />
statements for the year from 1 January to 31 December 2009 have been properly prepared<br />
based on the audited financial statements for the year from 1 January to 31 December 2009.<br />
Our responsibility and liability towards <strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung<br />
as well as towards third parties is subject to the liability limitations of Art. 275 par. 2 Austrian<br />
Commercial Code.<br />
We conducted our audit in accordance with national auditing standards. Those standards<br />
require that we plan and perform the audit in such a manner that we are able to give a<br />
reasonable assurance whether the cash flow statements are free from any material mistakes.<br />
Our audit has not given rise to any objections. In our opinion, the cash flow statement for the<br />
financial years from 1 January to 31 December 2009 has been properly prepared based on<br />
the financial statements for the year from 1 January to 31 December 2009."<br />
Page 71
LEGAL PROCEEDINGS<br />
The Issuer has no information on any governmental, legal or arbitration proceedings, nor is<br />
the Issuer aware of any such proceedings which are pending or threatening, during a period<br />
covering the previous 12 months which may have, or have had in the recent past, significant<br />
effects on the Issuer and/or the Group's financial position or profitability.<br />
Page 72
MATERIAL CONTRACTS<br />
Since 31 December 2010, <strong>ERSTE</strong> Foundation has not entered into any agreements apart<br />
from such agreements within the scope of its normal business activities that may result in the<br />
Issuer acquiring an obligation or a right that is of material significance for the capacity of the<br />
Issuer to comply with its obligations towards the holders of the Notes or exercise a right with<br />
respect to the Notes.<br />
<strong>ERSTE</strong> Foundation is a party to the following material agreements:<br />
Cooperation Agreement with La Caixa and Criteria<br />
On 4 June 2009, <strong>ERSTE</strong> Foundation, jointly with Erste Group Bank, entered into a<br />
cooperation agreement with Caja de Ahorros y Pensiones de Barcelona ("La Caixa") and<br />
Criteria CaixaCorp, S.A. ("Criteria"). This agreement includes framework conditions for a nonexclusive<br />
business cooperation between Erste Group Bank, La Caixa, one of the largest<br />
Spanish banking groups, and Criteria. The agreement gives Criteria the right – under certain<br />
conditions – to the preferential right to take part in the acquisition of financial service providers<br />
and banks in CEE and CIS countries if Erste Group Bank desires a co-investor for such an<br />
acquisition.<br />
Agreement with Criteria on a binding "Preferred Partnership Agreement"<br />
<strong>ERSTE</strong> Foundation has entered into a "Preferred Partnership Agreement" with Criteria. Under<br />
this agreement, Criteria is considered a long-term, strategic and friendly investor of Erste<br />
Group Bank and shall refrain from making or supporting any hostile takeover bids.<br />
Furthermore, the agreement contains provisions on certain rights of Criteria and <strong>ERSTE</strong><br />
Foundation with respect to their holdings in Erste Group Bank. The exercise of joint control by<br />
Criteria and <strong>ERSTE</strong> Foundation over Erste Bank Group is not intended and <strong>ERSTE</strong><br />
Foundation and Criteria may exercise their voting rights as desired. In July 2011, La Caixa<br />
and Criteria re-organised their corporate structure with the consequence that now the newly<br />
formed “CaixaBank” is a shareholder in Erste Group and consequently <strong>ERSTE</strong> Foundation’s<br />
new partner in the “Preferred Partnership Agreement”, with all agreements remaining<br />
unchanged.<br />
Master Agreement on the issuance of Notes and the appointment of the paying agent<br />
The Issuer entered into a master agreement on 22 March 2010, as supplemented on or about<br />
6 December 2011 with Erste Group Bank in connection with the issuance of Notes. According<br />
to the provisions of this Agreement, the Issuer grants Erste Group Bank for the term of this<br />
Agreement the right to act as Lead Manager and Paying Agent for all bearer Notes to be<br />
issued by the Issuer. The Agreement shall be effective for an indefinite period of time and<br />
may be terminated at the end of a calendar quarter by either of the contractual parties by<br />
observing a period of notice of four weeks. Furthermore, the contract may be terminated in<br />
the case of material breach of contract with a 14 days' notice by either of the contractual<br />
parties. The Agreement ends automatically with the opening of insolvency proceedings over<br />
the Issuer. Erste Group Bank as Lead Manager does not assume any underwriting<br />
commitment for issues by the Issuer but sells the securities mentioned in the Agreement in<br />
the name of and for the account of the Issuer. Erste Group Bank shall receive from the Issuer<br />
an appropriate commission in accordance with usual market rates for the provision of its<br />
services as a Lead Manager and paying agent.<br />
Page 73
TAXATION<br />
The statements herein regarding certain tax issues in Austria, the Czech Republic,<br />
Luxembourg and the Slovak Republic are based on the laws in force in those jurisdictions as<br />
of the date of this Prospectus and are subject to any changes in such laws. The following<br />
summaries do not purport to be comprehensive descriptions of all the tax considerations<br />
which may be relevant to a decision to purchase, own or dispose of Notes and further<br />
disclosure may be included in the Final Terms or a supplement to this Prospectus.<br />
Prospective holders of Notes should consult their tax advisors as to the relevant tax<br />
consequences of the ownership and disposition of Notes.<br />
AUSTRIA<br />
This section on taxation contains a brief summary of the Issuer's understanding with regard to<br />
certain important principles which are of significance in connection with the purchase, holding<br />
or sale of the Notes in the Republic of Austria. This summary does not purport to exhaustively<br />
describe all possible tax aspects and does not deal with specific situations which may be of<br />
relevance for certain potential investors. The following comments are rather of a general<br />
nature and included herein solely for information purposes. These comments are not intended<br />
to be, nor should they be construed to be, legal or tax advice. This summary furthermore only<br />
refers to investors which are subject to unlimited (corporate) income tax liability in Austria. It is<br />
based on the currently valid tax legislation, case law and regulations of the tax authorities, as<br />
well as their respective interpretation, all of which may be amended from time to time. Such<br />
amendments may possibly also be effected with retroactive effect and may negatively impact<br />
on the tax consequences described. It is recommended that potential purchasers of the Notes<br />
consult with their legal and tax advisors as to the tax consequences of the purchase, holding<br />
or sale of the Notes. Tax risks resulting from the Notes shall in any case be borne by the<br />
purchaser. In general, it has to be noted that the Austrian tax authorities have a rather critical<br />
attitude towards structured products which may also give rise to tax benefits.<br />
General remarks<br />
Individuals having a permanent domicile (Wohnsitz) and/or their habitual abode (gewöhnlicher<br />
Aufenthalt) in Austria are subject to income tax (Einkommensteuer) in Austria on their<br />
worldwide income (unlimited income tax liability; unbeschränkte Einkommensteuerpflicht).<br />
Individuals having neither a permanent domicile nor their habitual abode in Austria are subject<br />
to income tax only on income from certain Austrian sources (limited income tax liability;<br />
beschränkte Einkommensteuerpflicht).<br />
Corporations having their place of effective management (Ort der Geschäftsleitung) and/or<br />
their legal seat (Sitz) in Austria are subject to corporate income tax (Körperschaftsteuer) in<br />
Austria on their worldwide income (unlimited corporate income tax liability; unbeschränkte<br />
Körperschaftsteuerpflicht). Corporations having neither their place of effective management<br />
nor their legal seat in Austria are subject to corporate income tax only on income from certain<br />
Austrian sources (limited corporate income tax liability; beschränkte Körperschaftsteuerpflicht).<br />
Both in case of unlimited and limited (corporate) income tax liability Austria's right to tax may<br />
be restricted by double taxation treaties.<br />
As of 1 January 2011 the Budget Accompanying Act of 2011 (Budgetbegleitgesetz 2011),<br />
which will lead to significant changes in the taxation of financial instruments, entered into<br />
force. Since the Austrian Constitutional Court (Verfassungsgerichtshof) decided that the<br />
primary implementation date of 1 October 2011 is unconstitutional, the Tax Amendments Act<br />
of 2011 (Abgabenänderungsgesetz 2011) postponed it by six months until 1 April 2012. As of<br />
the date of this Prospectus, the Austrian Parliament was in the process of passing the Budget<br />
Accompanying Act of 2012 (Budgetbegleitgesetz 2012), which will lead to certain changes in<br />
Page 74
the taxation of financial instruments. The tax disclosure below already incorporates the<br />
expected changes.<br />
Income taxation of Notes purchased before 1 April 2012<br />
In general, the Notes qualify as bonds (Forderungswertpapiere) in the sense of sec. 93(3) of<br />
the Austrian Income Tax Act (Einkommensteuergesetz).<br />
Individuals subject to unlimited income tax liability in Austria holding bonds in the sense of<br />
sec. 93(3) of the Austrian Income Tax Act as a non-business asset (Privatvermögen) are<br />
subject to income tax on all resulting interest payments (which term also encompasses the<br />
difference between the redemption price and the issue price) pursuant to sec. 27(1)(4) and<br />
sec. 27(2)(2) of the Austrian Income Tax Act. If such interest is paid out by an Austrian paying<br />
agent (kuponauszahlende Stelle) then the payments are subject to a withholding tax of 25%.<br />
No additional income tax is levied over and above the amount of tax withheld (final taxation;<br />
Endbesteuerung) in case the bonds are legally and factually offered to an indefinite number of<br />
persons. If interest payments are not effected through an Austrian paying agent, a flat income<br />
tax rate of 25% applies in case the bonds are in addition legally and factually offered to an<br />
indefinite number of persons. Since in this case no withholding tax is levied, interest<br />
payments must be included in the income tax return of the investor. If the bonds are not<br />
legally and factually offered to an indefinite number of persons then the interest payments<br />
must also be included in the investor's income tax return and are subject to income tax at a<br />
marginal rate of up to 50%, any withholding tax being creditable against the income tax<br />
liability.<br />
Individuals subject to unlimited income tax liability in Austria holding bonds as a business<br />
asset (Betriebsvermögen) are subject to income tax on all resulting interest payments (which<br />
term also encompasses the difference between the redemption price and the issue price).<br />
Such interest payments are subject to a withholding tax of 25% in case they are paid out by<br />
an Austrian paying agent. No additional income tax is levied over and above the amount of<br />
tax withheld (final taxation) in case the bonds are legally and factually offered to an indefinite<br />
number of persons. If interest payments are not effected through an Austrian paying agent, a<br />
flat income tax rate of 25% applies in case the bonds are in addition legally and factually<br />
offered to an indefinite number of persons. Since in this case no withholding tax is levied,<br />
interest payments must be included in the income tax return of the investor. If the bonds are<br />
not legally and factually offered to an indefinite number of persons, then the interest payments<br />
must also be included in the investor's income tax return and are subject to income tax at a<br />
marginal rate of up to 50%, any withholding tax being creditable against the income tax<br />
liability.<br />
Corporations subject to unlimited corporate income tax liability in Austria are subject to<br />
corporate income tax on all interest payments (which term also encompasses the difference<br />
between the redemption price and the issue price) resulting from bonds at a rate of 25%.<br />
Under the conditions set forth in sec. 94(5) of the Austrian Income Tax Act no withholding tax<br />
is levied.<br />
Private foundations (Privatstiftung) pursuant to the Austrian Private Foundations Act<br />
(Privatstiftungsgesetz) fulfilling the prerequisites contained in sec. 13(6) of the Austrian<br />
Corporate Income Tax Act (Körperschaftsteuergesetz) and holding bonds as a non-business<br />
asset are subject to interim taxation (Zwischenbesteuerung) on all resulting interest payments<br />
received (which term also encompasses the difference between the redemption price and the<br />
issue price) at a rate of 25% in case the bonds are in addition legally and factually offered to<br />
an indefinite number of persons. If the bonds are not legally and factually offered to an<br />
indefinite number of persons, then the interest payments are subject to corporate income tax<br />
at a rate of 25%. Under the conditions set forth in sec. 94(11) of the Austrian Income Tax Act<br />
no withholding tax is levied.<br />
Page 75
Income taxation of Notes purchased after 31 March 2012<br />
With the passing of the Budget Accompanying Act of 2011, the Austrian legislator intends to<br />
comprehensively realign the taxation of financial instruments, in particular with regard to<br />
capital gains. Pursuant to the newly worded sec. 27(1) of the Austrian Income Tax Act, the<br />
term investment income (Einkünfte aus Kapitalvermögen) comprises:<br />
� income from the letting of capital (Einkünfte aus der Überlassung von Kapital) pursuant to<br />
sec. 27(2) of the Austrian Income Tax Act, including dividends and interest on bonds;<br />
� income from realised increases in value (Einkünfte aus realisierten Wertsteigerungen)<br />
pursuant to sec. 27(3) of the Austrian Income Tax Act, including gains from the sale,<br />
redemption and other realisation of assets that lead to income from the letting of capital<br />
(as well as the balance between the redemption price and the issue price in case of zero<br />
coupon bonds), and also broken-period interest; and<br />
� income from derivatives (Einkünfte aus Derivaten) pursuant to sec. 27(4) of the Austrian<br />
Income Tax Act, including cash settlements, option premiums received and income from<br />
the sale or other realisation of forward contracts like options, futures and swaps and other<br />
derivatives such as index certificates.<br />
Also the withdrawal of Notes from bank deposits (Depotentnahme) is considered as a<br />
realisation of assets; however, no taxation is triggered if certain disclosures are made.<br />
Individuals subject to unlimited income tax liability in Austria holding Notes as a non-business<br />
asset are subject to income tax on all resulting investment income pursuant to sec. 27(1) of<br />
the Austrian Income Tax Act. In case of investment income with an Austrian nexus<br />
(inländische Einkünfte aus Kapitalvermögen), basically meaning income that is paid by an<br />
Austrian paying agent (auszahlende Stelle) or an Austrian custodian agent (depotführende<br />
Stelle), the income is subject to a withholding tax of 25%; no additional income tax is levied<br />
over and above the amount of tax withheld (final taxation pursuant to sec. 97(1) of the<br />
Austrian Income Tax Act). In case of investment income without an Austrian nexus, the<br />
income must be included in the income tax return; in this case it is subject to a flat income tax<br />
rate of 25%. Special rules apply for bonds that have not been legally and factually offered to<br />
an indefinite number of persons. Here, the investment income will in no case be subject to a<br />
withholding tax, but will always have to be included in the income tax return (marginal rate of<br />
up to 50%). Certain restrictions apply regarding the offsetting of losses.<br />
Individuals subject to unlimited income tax liability in Austria holding Notes as a business<br />
asset are subject to income tax on all resulting investment income pursuant to sec. 27(1) of<br />
the Austrian Income Tax Act. In case of investment income with an Austrian nexus (as<br />
described above) the income is subject to a withholding tax of 25%. While this withholding tax<br />
has the effect of final taxation for income from the letting of capital, income from realised<br />
increases in value and income from derivatives must on the other hand be included in the<br />
income tax return (nevertheless flat income tax rate of 25%). In case of investment income<br />
without an Austrian nexus, the income must always be included in the income tax return (flat<br />
income tax rate of 25%). Special rules apply for bonds that have not been legally and factually<br />
offered to an indefinite number of persons. Here, the investment income will in no case be<br />
subject to a withholding tax, but will always have to be included in the income tax return<br />
(marginal rate of up to 50%). Certain restrictions apply regarding the offsetting of losses.<br />
Corporations subject to unlimited corporate income tax liability in Austria are subject to<br />
corporate income tax on all investment income resulting from Notes at a rate of 25%. In case<br />
of investment income with an Austrian nexus (as described above) the income is subject to a<br />
withholding tax of 25%, which can be credited against the corporate income tax liability.<br />
However, under the conditions set forth in sec. 94(5) of the Austrian Income Tax Act no<br />
withholding tax is levied in the first place.<br />
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Private foundations pursuant to the Austrian Private Foundations Act fulfilling the<br />
prerequisites contained in sec. 13(6) of the Austrian Corporate Income Tax Act and holding<br />
Notes as a non-business asset are subject to interim taxation at a rate of 25% on interest<br />
income, income from realised increases in value and income from derivatives. According to<br />
the wording of the statute, interest income from bonds that have not been legally and factually<br />
offered to an indefinite number of persons is not subject to interim taxation but rather to<br />
corporate income tax at a rate of 25%. In case of investment income with an Austrian nexus<br />
(as described above) the income is subject to a withholding tax of 25%, which can be credited<br />
against the tax falling due. Under the conditions set forth in sec. 94(12) of the Austrian<br />
Income Tax Act no withholding tax is levied.<br />
Pursuant to the draft bill of the Budget Accompanying Act of 2012, as of 1 January 2013, the<br />
Austrian custodian agent will be obliged to offset losses from investment income against<br />
gains from investment income, taking into account all of a taxpayer's bank deposits with the<br />
custodian agent.<br />
EU withholding tax<br />
Sec. 1 of the Austrian EU Withholding Tax Act (EU-Quellensteuergesetz) – which transforms<br />
into national law the provisions of Council Directive 2003/48/EC of 3 June 2003 on taxation of<br />
savings income in the form of interest payments – provides that interest payments paid or<br />
credited by an Austrian paying agent to a beneficial owner who is an individual resident in<br />
another Member State (or in certain dependant or associated territories) is subject to a<br />
withholding tax if no exception from such withholding applies. Sec. 10 of the Austrian EU<br />
Withholding Tax Act provides for an exemption from withholding tax where the beneficial<br />
owner presents to the paying agent a certificate drawn up in his/her name by the competent<br />
authority of his/her Member State of residence for tax purposes, indicating the name, address<br />
and tax or other identification number or, failing such, the date and place of birth of the<br />
beneficial owner, the name and address of the paying agent, and the account number of the<br />
beneficial owner or, where there is none, the identification of the security; such certificate<br />
shall be valid for a period not exceeding three years. As of 1 July 2011, the withholding rate<br />
has been raised to 35%.<br />
Regarding the issue of whether also index certificates are subject to the EU withholding tax,<br />
the Austrian tax authorities distinguish between index certificates with and without a capital<br />
guarantee, a capital guarantee being the promise of repayment of a minimum amount of the<br />
capital invested or the promise of the payment of interest. The exact tax treatment of index<br />
certificates furthermore depends on their underlying.<br />
Austrian inheritance and gift tax<br />
Austria does not levy an inheritance and gift tax anymore.<br />
However, it should be noted that certain gratuitous transfers of assets to (Austrian or foreign)<br />
private law foundations and comparable legal estates (privatrechtliche <strong>Stiftung</strong>en und damit<br />
vergleichbare Vermögensmassen) are subject to foundation tax (<strong>Stiftung</strong>seingangssteuer)<br />
pursuant to the Austrian Foundation Tax Act (<strong>Stiftung</strong>seingangssteuergesetz). Such tax is<br />
triggered if the transferor and/or the transferee at the time of transfer have a domicile, their<br />
habitual abode, their legal seat or their place of effective management in Austria. Certain<br />
exemptions apply in case of a transfer mortis causa, in particular for bank deposits, publicly<br />
placed bonds and portfolio shares (i.e., less than 1%). The tax basis is the fair market value of<br />
the assets transferred minus any debts, calculated at the time of transfer. The tax rate is in<br />
general 2.5%, with a higher rate of 25% applying in special cases.<br />
In addition, a special notification obligation exists for gifts of money, receivables, shares in<br />
corporations, participations in partnerships, businesses, movable tangible assets and<br />
intangibles. The notification obligation applies if the donor and/or the donee have a domicile,<br />
their habitual abode, their legal seat or their place of effective management in Austria. Not all<br />
Page 77
gifts are covered by the notification obligation: In case of gifts to certain related parties, a<br />
threshold of EUR 50,000 per year applies; in all other cases, a notification is obligatory if the<br />
value of gifts made exceeds an amount of EUR 15,000 during a period of five years.<br />
Furthermore, gratuitous transfers to foundations falling under the Austrian Foundation Tax Act<br />
described above are also exempt from the notification obligation. Intentional violation of the<br />
notification obligation may lead to the levying of fines of up to 10% of the fair market value of<br />
the assets transferred.<br />
Page 78
CZECH REPUBLIC<br />
General<br />
Czech tax implications largely depend on whether the Notes qualify as securities. Certain<br />
types of Notes (e.g. certificates and warrants) are not explicitly defined by Czech law.<br />
However, according to a statement published by the Czech National Bank (Czech financial<br />
market regulator), the term "securities" also involves securities that are not specified in the<br />
Czech Capital Markets Act – provided that they meet the general conditions for securities as<br />
indicated in the Czech National Bank’s official statement of 10 September 2007 regarding the<br />
issue of securities that are not provided for by Czech law, published in the Czech National<br />
Bank’s Bulletin.<br />
The information below is based on the assumption that the Notes fulfill all conditions for the<br />
treatment as securities under Czech law. For Czech taxation purposes, proceeds from<br />
specific Notes will be treated either as interest income or capital gains, which may result in<br />
differences in taxation. Prospective investors should verify, among others, the nature of the<br />
Notes and the type of income for each type of the Notes.<br />
Residents<br />
Capital gains<br />
Under the double taxation treaty between Austria and the Czech Republic capital gains from<br />
the sale of the Notes by a tax resident of the Czech Republic are taxable in the Czech<br />
Republic.<br />
Individual investors<br />
Capital gains from the sale of the Notes are exempt from Czech personal income tax if an<br />
individual has held the Notes as a non-business asset for an uninterrupted period of more<br />
than six months. This time limit only applies to non-shareholders and shareholders of the<br />
Issuer who hold a stake of less than 5% in the issuer of the Notes. In all other cases, the<br />
individual must hold the Notes for an uninterrupted period of more than five years for the<br />
personal income tax exemption to be applicable. Either way, the exemption only applies if the<br />
Notes have not been included in the individual’s business assets at any point in time prior to<br />
their sale.<br />
If capital gains from the sale of the Notes held by individuals as a non-business asset are not<br />
tax-exempt, they are subject to personal income tax at a flat rate of 15%, the tax base being<br />
calculated as the income from the sale of the Notes reduced by the purchase price of the<br />
Notes and costs related to their acquisition. A loss from the sale of the Notes may be offset<br />
against gains from the sale of the Notes or other securities in the same fiscal period.<br />
In the case of individuals holding the Notes as a business asset the capital gain from the sale<br />
of the Notes is included in their general income tax base and taxed at a flat rate of 15%. A<br />
loss from the sale of the Notes may be offset against their overall taxable income (other than<br />
employment income) in the current fiscal period. Excess tax losses generated in the current<br />
fiscal year may be carried forward for five fiscal periods.<br />
Corporations<br />
Capital gains from the sale of the Notes held by corporations are to be included in their<br />
general income tax base and taxed at a flat rate of 19%. A loss from the sale of the Notes<br />
may be offset against profits in the current fiscal period or may be carried forward for five<br />
fiscal periods.<br />
Interest<br />
Page 79
Under the double taxation treaty between Austria and the Czech Republic, interest paid from<br />
Austria to a Czech tax resident is taxable in the Czech Republic. However, the Austrian<br />
paying agent may under certain conditions deduct withholding tax from interest payments on<br />
the Notes in Austria if the Council Directive 2003/48/EC of 3 June 2003 on taxation of savings<br />
income in the form of interest payments (the "EU Savings Directive") is applicable (see<br />
"Austria" above).<br />
Interest paid on the Notes to a Czech tax resident from foreign sources is subject to income<br />
tax in the Czech Republic.<br />
Individual investors<br />
An individual investor must include the interest received in his overall personal income tax<br />
base, which is taxable at a flat rate of 15%.<br />
If a withholding tax is deducted on the interest in Austria under the EU Savings Directive, the<br />
individual Czech tax resident may declare the tax deducted in Austria on his Czech income<br />
tax return and claim a credit against his Czech tax liability due on the income in respect of<br />
which the deduction was made. If the deduction is greater than the tax liability, the resident<br />
may claim the amount of the surplus from the Czech tax authority.<br />
Corporations<br />
A corporation must include the interest received in its general corporate income tax base,<br />
which is taxable at a flat rate of 19%.<br />
Inheritance and gift tax<br />
If acquiring the Notes as a gift or as an inheritance, resident (and under certain circumstances<br />
also non-resident) individuals and corporations are liable to pay the Czech gift tax or<br />
inheritance tax. The Czech gift tax rate ranges from 1% to 40% and the Czech inheritance tax<br />
rate ranges from 0.5% to 20%. Applicable tax rates depend on the value of the assets<br />
transferred and on the relationship between the deceased/the donor on the one hand and the<br />
heir/the donee on the other hand. A tax exemption may be applied in specific cases, such as<br />
succession by direct relatives and spouses.<br />
Other taxes<br />
No other taxes are levied in the Czech Republic on the acquisition, sale or other disposal of<br />
the Notes.<br />
Non-residents<br />
Tax non-residents are subject to tax only on their Czech source income. Income derived by a<br />
permanent establishment located in the Czech Republic is deemed to be Czech source<br />
income.<br />
Each individual or corporation that receives income subject to Czech tax is obliged to file an<br />
application for registration with the tax authority unless it is accidental or just a one-time tax<br />
liability.<br />
Income may be exempt from taxation or the tax liability may be reduced under the terms of a<br />
relevant double taxation treaty.<br />
Interest<br />
Interest income paid by a Czech paying agent to a non-resident may be treated as Czech<br />
source income. In this case the Czech paying agent withholds a 15% withholding tax from the<br />
Page 80
interest paid (with the exception of interest paid to a Czech permanent establishment). The<br />
withholding tax rate may be reduced by an applicable double taxation treaty.<br />
If the interest is considered as income of a permanent establishment, the withholding tax does<br />
not apply and the individual or corporation having the permanent establishment has to pay tax<br />
on the interest income in the same way as tax residents (see the section on residents above).<br />
Under the EU Interest Royalty Directive, the interest paid by the Czech company to related<br />
company located in EU countries or in the Switzerland, Denmark or Iceland may be exempt<br />
from withholding tax if certain additional conditions are met.Capital gains<br />
Income from the sale of the Notes payable by a Czech tax resident or by a permanent<br />
establishment of a Czech tax non-resident located in the Czech Republic to a non-resident<br />
shall be treated as Czech source income taxable in the Czech Republic. The income may be<br />
exempt from taxation under an applicable double taxation treaty.<br />
If no double taxation treaty applies, the following Czech taxation should be taken into account:<br />
Individual investors<br />
Capital gains from the sale of the Notes are exempt from Czech personal income tax if an<br />
individual has held the Notes as a non-business asset for an uninterrupted period of more<br />
than six months. This time limit only applies to investment securities where a shareholding<br />
comprises a maximum of 5%. Otherwise, the individual must hold the Notes for an<br />
uninterrupted period of more than five years for the personal income tax exemption to be<br />
applicable. Either way, the exemption only applies if the Notes have not been included in the<br />
individual’s business assets at any point in time prior to their sale.<br />
If capital gains from the sale of the Notes held by individuals as a non-business asset are not<br />
tax-exempt, they are subject to personal income tax at a flat rate of 15%, the tax base being<br />
calculated as the income from the sale of the Notes reduced by the purchase price of the<br />
Notes and charges related to their acquisition. A loss from the sale of the Notes may be offset<br />
against gains from the sale of the Notes or other securities in the same fiscal period.<br />
In the case of individuals holding the Notes as a business asset the capital gain from the sale<br />
of the Notes is included in their general income tax base and taxed at a flat rate of 15%. A<br />
loss from the sale of the Notes may be offset against overall taxable income (other than<br />
employment income) in the current fiscal period and the following five fiscal periods.<br />
Corporations<br />
Capital gains from the sale of the Notes held by corporations are included in their general<br />
income tax base and taxed at a flat rate of 19% in 2011. A loss from the sale of the Notes<br />
may be offset against profits in the current fiscal period and the following five fiscal periods.<br />
Purchase of the Notes from a non-EEA resident<br />
A Czech resident who purchases the Notes from a resident from outside the European<br />
Economic Area is obliged to withhold and pay a tax security advance at a rate of 1% of the<br />
purchase price for the Notes to the Czech tax authorities unless the respective double<br />
taxation treaty provides tax exemption of the capital gain in the Czech Republic.<br />
If no double taxation treaty is applicable, the seller should file a Czech corporate/personal<br />
income tax return, in which the withheld tax security advance is deducted from the final tax<br />
liability assessed at regular tax rates. If no tax return is filed, the tax security advance withheld<br />
will be treated as the final tax.<br />
Page 81
If the Notes are attributed to the permanent establishment of a non-Czech tax resident, a<br />
different tax regime applies. In general, the gain is taxed as a regular business profit of the<br />
permanent establishment in the Czech Republic.<br />
Inheritance and gift tax<br />
Subject to gift tax is the donation of the Notes located in the Czech Republic to non-resident<br />
individuals and corporations. In case the donor is a Czech resident, the tax is payable by the<br />
donor; if the donor is a non-resident, the tax is payable by the non-resident donee. Czech law<br />
is applicable only if a treaty does not provide otherwise.<br />
Subject to inheritance tax are all Notes inherited by non-residents in case the deceased was a<br />
citizen of the Czech Republic. If the deceased was not a citizen of the Czech Republic, nonresidents<br />
are liable to inheritance tax only on Notes located in the Czech Republic at the time<br />
of the death of the deceased. This applies unless an international treaty provides otherwise.<br />
The Czech gift tax rate ranges from 1% to 40% and the Czech inheritance tax rate ranges<br />
from 0.5% to 20%. Applicable tax rates depend on the value of the assets transferred and on<br />
the relationship between the deceased/the donor on the one hand and the heir/the donee on<br />
the other hand. A 100% tax exemption may be applied in specific cases, such as succession<br />
by direct relatives and spouses.<br />
Implementation of the EU Savings Directive<br />
The Czech Republic has implemented the EU Savings Directive. If the payments qualify as<br />
interest or other similar income under the EU Savings Directive, a Czech paying agent will<br />
collect certain specified details in respect of the payments of interest and other similar income<br />
mediated by the Czech paying agent and the Czech Republic will provide this information to<br />
the tax authorities in other EU Member States. The same regime also applies in respect of<br />
certain non-EU countries and dependent territories, such as Switzerland, San Marino,<br />
Monaco, Andorra and Liechtenstein.<br />
Other taxes<br />
No other taxes are levied in the Czech Republic on the acquisition, sale or other disposal of<br />
the Notes.<br />
Page 82
LUXEMBOURG<br />
The following summary is of a general nature and is included herein solely for information<br />
purposes. It is based on the laws presently in force in Luxembourg, though it is not intended<br />
to be, nor should it be construed to be, legal or tax advice. Prospective investors in the Notes<br />
should therefore consult their own professional advisers as to the effects of state, local or<br />
foreign laws, including Luxembourg tax law, to which they may be subject.<br />
Please be aware that the residence concept used under the respective headings below<br />
applies for Luxembourg income tax assessment purposes only. Any reference in the present<br />
section to a tax, duty, levy, impost or other charge or withholding of a similar nature refers to<br />
Luxembourg tax law and/or concepts only. Also, please note that a reference to Luxembourg<br />
income tax encompasses corporate income tax (impôt sur le revenu des collectivités),<br />
municipal business tax (impôt commercial communal), a solidarity surcharge (contribution au<br />
fonds pour l'emploi), as well as personal income tax (impôt sur le revenu) generally. Investors<br />
may further be subject to net wealth tax (impôt sur la fortune) as well as other duties, levies or<br />
taxes. Corporate income tax, municipal business tax as well as the solidarity surcharge<br />
invariably apply to most corporate taxpayers resident of Luxembourg for tax purposes.<br />
Individual taxpayers are generally subject to personal income tax and the solidarity surcharge.<br />
Under certain circumstances, where an individual taxpayer acts in the course of the<br />
management of a professional or business undertaking, municipal business tax may apply as<br />
well.<br />
Withholding taxation of the holders of Notes<br />
(i) Resident holders of Notes<br />
Under Luxembourg general tax laws currently in force and subject to the law of 23 December<br />
2005, as amended (the "Law"), there is no withholding tax on payments of principal, premium<br />
or interest made to Luxembourg resident holders of Notes, nor on accrued but unpaid interest<br />
in respect of Notes, nor is any Luxembourg withholding tax payable upon redemption or<br />
repurchase of Notes held by Luxembourg resident holders of Notes.<br />
Under the Law, payments of interest or similar income made or ascribed by a paying agent<br />
established in Luxembourg to or for the benefit of an individual beneficial owner who is<br />
resident of Luxembourg will be subject to a withholding tax of 10%.<br />
Such withholding tax will be in full discharge of income tax if the beneficial owner is an<br />
individual acting in the course of the management of his/her private wealth. Responsibility for<br />
the withholding of the tax will be assumed by the Luxembourg paying agent. Payments of<br />
interest under the Notes coming within the scope of the Law would be subject to a withholding<br />
tax of 10%.<br />
(ii) Non-resident holders of Notes<br />
Under Luxembourg general tax laws currently in force and subject to the laws of<br />
21 June 2005 as amended (the "Laws"), there is no withholding tax on payments of principal,<br />
premium or interest made to non-resident holders of Notes, nor on accrued but unpaid<br />
interest in respect of the Notes held by non-resident holders of Notes, nor is any Luxembourg<br />
withholding tax payable upon redemption or repurchase of Notes held by non-resident holders<br />
of Notes.<br />
Under the Laws implementing the Council Directive 2003/48/EC of 3 June 2003 on taxation of<br />
savings income in the form of interest payments (the "EU Savings Directive")and ratifying<br />
the treaties entered into by Luxembourg and certain dependent and associated territories of<br />
EU Member States (the Territories), payments of interest or similar income made or ascribed<br />
by a paying agent established in Luxembourg to or for the immediate benefit of an individual<br />
beneficial owner or a residual entity, as defined by the Laws, which are resident of, or<br />
Page 83
established in, an EU Member State (other than Luxembourg) or one of the Territories will be<br />
subject to a withholding tax unless the relevant recipient has adequately instructed the<br />
relevant paying agent to provide details of the relevant payments of interest or similar income<br />
to the fiscal authorities of his/her/its country of residence or establishment, or, in the case of<br />
an individual beneficial owner, has provided a tax certificate issued by the fiscal authorities of<br />
his/her country of residence in the required format to the relevant paying agent. Responsibility<br />
for the withholding of the tax will be assumed by the Luxembourg paying agent. Payments of<br />
interest under the Notes coming within the scope of the laws would at present be subject to<br />
withholding tax of 35%.<br />
EU Savings Directive<br />
On 15 September 2008 the European Commission issued a report to the Council of the<br />
European Union on the operation of the EU Savings Directive, which included the<br />
Commission's advice on the need for changes to the EU Savings Directive. On 13 November<br />
2008 the European Commission published a more detailed proposal for amendments to the<br />
EU Savings Directive, which included a number of suggested changes. The European<br />
Parliament approved an amended version of this proposal on 24 April 2009. If any of the<br />
proposed changes are made in relation to the EU Savings Directive, they may amend or<br />
broaden the scope of the requirements described above.<br />
Income taxation<br />
(i) Resident holders of Notes<br />
A corporate holder of Notes must include any interest accrued or received, any redemption<br />
premium or issue discount, as well as any gain realised on the sale or disposal, in any form<br />
whatsoever, of the Notes, in its taxable income for Luxembourg income tax assessment<br />
purposes. The same inclusion applies to an individual holder of Notes, acting in the course of<br />
the management of a professional or business undertaking.<br />
A holder of Notes that is governed by the law of 11 May 2007 on family estate management<br />
companies, or by the law of 17 December 2010 on undertakings for collective investment, or<br />
by the law of 13 February 2007 on specialised investment funds. as amended, is neither<br />
subject to Luxembourg income tax at progressive rates in respect of interest accrued or<br />
received, any redemption premium or issue discount, nor on gains realised on the sale or<br />
disposal, in any form whatsoever, of the Notes.<br />
An individual holder of Notes, acting in the course of the management of his/her private<br />
wealth, is subject to Luxembourg income tax in respect of interest received, redemption<br />
premiums or issue discounts, under the Notes, except if (i) withholding tax has been levied on<br />
such payments in accordance with the Law, or (ii) the individual holder of the Notes has opted<br />
for the application of a 10% tax in full discharge of income tax in accordance with the Law,<br />
which applies if a payment of interest has been made or ascribed by a paying agent<br />
established in a EU Member State (other than Luxembourg), or in a Member State of the<br />
European Economic Area (other than an EU Member State), or in a state that has entered<br />
into a treaty with Luxembourg relating to the EU Savings Directive. A gain realised by an<br />
individual holder of Notes, acting in the course of the management of his/her private wealth,<br />
upon the sale or disposal, in any form whatsoever, of Notes is not subject to Luxembourg<br />
income tax, provided this sale or disposal took place more than six months after the Notes<br />
were acquired. However, any portion of such gain corresponding to accrued but unpaid<br />
interest income is subject to Luxembourg income tax, except if tax has been levied on such<br />
interest in accordance with the Law.<br />
(ii) Non-resident holders of Notes<br />
A non-resident holder of Notes, not having a permanent establishment or permanent<br />
representative in Luxembourg to which such Notes are attributable, is not subject to<br />
Page 84
Luxembourg income tax on interest accrued or received, redemption premiums or issue<br />
discounts, under the Notes. A gain realised by such non-resident holder of Notes on the sale<br />
or disposal, in any form whatsoever, of the Notes is further not subject to Luxembourg income<br />
tax.<br />
A non-resident corporate holder of Notes or an individual holder of Notes acting in the course<br />
of the management of a professional or business undertaking, who has a permanent<br />
establishment or permanent representative in Luxembourg to which such Notes are<br />
attributable, is subject to Luxembourg income tax on interest accrued or received, redemption<br />
premiums or issue discounts, under the Notes and on any gains realised upon the sale or<br />
disposal, in any form whatsoever, of the Notes.<br />
Net wealth taxation<br />
A corporate holder of Notes, whether it is a resident of Luxembourg for tax purposes or, if not,<br />
it maintains a permanent establishment or a permanent representative in Luxembourg to<br />
which such Notes are attributable, is subject to Luxembourg wealth tax on such Notes, except<br />
if the holder of Notes is governed by the law of 11 May 2007 on family estate management<br />
companies, or by the law of 17 December 2010 on undertakings for collective investment, as<br />
amended, or by the law of 13 February 2007 on specialised investment funds, as amended,<br />
or is a securitisation company governed by the law of 22 March 2004 on securitisation, as<br />
amended, or is a capital company governed by the law of 15 June 2004 on venture capital<br />
vehicles, as amended.<br />
An individual holder of Notes, whether he/she is resident of Luxembourg or not, is not subject<br />
to Luxembourg wealth tax on such Notes.<br />
Other taxes<br />
Neither the issuance nor the transfer of Notes will give rise to any Luxembourg stamp duty,<br />
value added tax, issuance tax, registration tax, transfer tax or similar taxes or duties.<br />
Where a holder of Notes is a resident of Luxembourg for tax purposes at the time of his/her<br />
death, the Notes are included in his/her taxable estate for inheritance tax assessment<br />
purposes.<br />
Gift tax may be due on a gift or donation of Notes if embodied in a Luxembourg deed passed<br />
in front of a Luxembourg notary or recorded in Luxembourg.<br />
Page 85
SLOVAK REPUBLIC<br />
General<br />
The purpose of the summary below is to provide a general overview of the relevant Slovak tax<br />
rules based on the laws in force in Slovakia as of the date of this Prospectus. It does not<br />
purport to be a comprehensive description of all tax implications that might be relevant to an<br />
investment decision. Please note that Investors in the Notes should consult with their<br />
professional advisers particular circumstances which should be examined and considered in<br />
detail.<br />
According to the Slovak Act on Securities and Investment Services (No. 566/2001 Coll.) a<br />
security is defined widely and shall mean any instrument or record which is assessable in<br />
monetary terms, created in a form stipulated by law, carrying rights as defined in that Act and<br />
in separate laws, in particular the right to demand certain assets or exercise certain rights<br />
against persons specified by law. The information below is based on the assumption that the<br />
Notes fulfil all conditions for the treatment as securities under Slovak law.<br />
Residency<br />
Individuals, who are residents in Slovakia, are subject to unlimited income tax liability on their<br />
world-wide income (i.e. income from domestic and foreign sources). An individual is resident<br />
in Slovakia if he/she has his/her domicile (a registered permanent stay) or habitual place of<br />
abode (a physical presence for more than 183 days in a calendar year) in Slovakia.<br />
Corporations having their registered office and/or their place of effective management (the<br />
place, in which management and business decisions are taken by statutory and supervisory<br />
bodies of the legal entity) in the territory of the Slovak Republic are subject to corporate<br />
income tax in Slovakia on their world-wide income (i.e. income from domestic and foreign<br />
sources).<br />
Non-residents (both individuals and corporations) are subject to income tax only on income<br />
from certain Slovak sources. Both in case of residents and non-residents Slovak's right to tax<br />
may be restricted by a relevant double taxation treaty.<br />
Residents<br />
Interest<br />
In general, interest income earned from the securities is subject to a withholding tax of 19%. If<br />
the interest paid has a source in Slovakia, the tax should be withheld by a paying agent at the<br />
moment of payment. The tax withheld could have an effect of final taxation or the taxpayer<br />
could offset it against the tax due in the same fiscal period.<br />
In case the recipient of the interest payment from an Austrian source is a Slovak resident, the<br />
relevant provision of the double taxation treaty between Austria and the Slovak Republic is<br />
applicable. Under this double taxation treaty, interest income received by a Slovak tax<br />
resident from Austria is in general only taxable in the Slovak Republic.<br />
Note that an Austrian paying agent may, under certain conditions, deduct a withholding tax<br />
from interest payments in Austria if the Savings Directive (2003/48/EC) is applicable. If such<br />
withholding tax is levied in Austria, it can be credited against the tax liability through filing a<br />
personal income tax return in Slovakia.<br />
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Capital gains<br />
Income from the sale of securities issued in Austria is subject to (personal/corporate) income<br />
tax in Slovakia if the recipient is a Slovak resident. Such income should be included in the<br />
taxpayer's income tax base.<br />
When considering the taxation of the sale of securities the source of which is in Austria, the<br />
provisions of the existing double taxation treaty between Austria and the Slovak Republic<br />
should be taken into consideration. Under the provisions of this double taxation treaty capital<br />
gains from the sale of such securities are in general taxable only in the Slovak Republic. The<br />
income tax is levied as follows:<br />
Individual investors holding the Notes as a non-business asset<br />
Capital gains from the sale of the Notes are subject to personal income tax at a flat rate of<br />
19%. A loss from the sale of the Notes shall not be offset against gains from the sale of the<br />
Notes or other securities in the same fiscal period - only the expenses up to the amount of<br />
income shall be considered upon the calculation of the tax base.<br />
The tax base shall be equal to the taxable income less any expenses, which may be<br />
documented as having been incurred in order to generate the income. Expenses that can be<br />
deducted are the purchase price proven to be paid for the Notes, or when there is no<br />
purchase then the price for the Notes determined at the time when the Notes were acquired,<br />
and the expenses related to the acquisition or purchase of the Notes.<br />
Capital gains from the sale of the Notes will be exempt from Slovak personal income tax if the<br />
aggregate of the tax base related to the "other income" category (i.e. debentures, shares, bills<br />
of exchange etc.) does not exceed the flat amount of EUR 500 (effective as of January 1,<br />
2011). The same limit for exemption relates to rental income, income from the transfer of<br />
options, income from the transfer of an interest in a company etc. If the above mentioned limit<br />
is exceeded, only the excess amount is included in the tax base.<br />
Individual investors holding the Notes as a business asset<br />
In the Slovak Republic there is no difference between the tax rate for individuals and<br />
corporations. Capital gains from the sale of the Notes are included in the personal income tax<br />
base and taxed at a flat rate of 19%.<br />
In the case of the sale of securities, a loss is generally treated as a tax non-deductible<br />
expense. However, a loss from the sale of the Notes may be offset against the gains from the<br />
sale of the Notes or other securities in the same fiscal period.<br />
Under the following conditions the loss incurred is entirely accepted as a tax deductible<br />
expense: (i) securities traded at a stock exchange, the acquisition cost of which is not higher,<br />
and the proceeds from the sale of which are not lower than a deviation of 10% from the<br />
average quotation published by the stock exchange on the date of purchase or sale, or, if the<br />
securities are not traded on such a date, from the last published average quotation; as<br />
regards the securities above, the expense shall be equal to the acquisition cost of shares, or,<br />
with respect to other securities, the acquisition cost adjusted by the valuation difference<br />
arising out of valuation at the fair market price which is included in the tax base; (ii) bonds, the<br />
selling price of which is not lower by more than the interest accrued on the bonds and<br />
included in the tax base prior to the date of sale or the date of maturity of the bond; and (iii)<br />
for taxable parties which are engaged in the trading with securities pursuant to special<br />
legislation, and which may deduct the expense of the acquisition of securities up to the<br />
amount posted as their cost.<br />
Corporations<br />
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Capital gains from the sale of the Notes are included in the corporate income tax base and<br />
taxed at a flat tax rate of 19%. In the Slovak Republic there is no difference in taxation of<br />
capital gains of individual investors holding the Notes as a business asset and corporations,<br />
therefore the section above applies to corporations as well.<br />
Non-residents<br />
If the recipient of the interest income is a taxpayer with limited tax liability in Slovakia, the<br />
particular double taxation treaty should be considered (if any). For a non-resident taxpayer<br />
the tax withheld may be treated as a prepayment provided that the tax was withheld from the<br />
interest or other income from the credits, loans and derivates pursuant to the special<br />
legislation (Act No. 566/2001 Coll.). The tax withheld may be credited against the tax liability<br />
in the tax return (in case of the affirmative tax base) or refunded via tax return (in case of the<br />
tax loss).<br />
EU Savings Directive<br />
The Slovak Republic has implemented the Directive 2003/48/EC on taxation of savings<br />
income in the form of interest payments. Therefore, an exchange of information between tax<br />
authorities is applicable. Pursuant to the Act on Tax Administration, a Slovak paying agent,<br />
who pays interest income to an individual beneficial owner from another EU Member State or<br />
from a dependent or associated territory of a Member State, is obliged to provide specific<br />
information about such payment to the tax authorities by 31 March for the previous calendar<br />
year.<br />
Interest income subject to the automatic exchange of information is defined in the Act on Tax<br />
Administration as follows: interest and other income from credits and loans, interest from<br />
deposits in a term deposit and current accounts, income incurred from participation<br />
certificates, bonds, certificates of deposit, treasury bills and other securities of similar<br />
characteristics during the holding of such a financial instrument or income accrued at the sale,<br />
refund or redemption of the financial instrument.<br />
The aim of the automatic exchange of information between Member States concerning<br />
interest payments under the provisions of the Savings Directive is the effective taxation of<br />
interest payments in the beneficial owner's Member State of residence in accordance with the<br />
national law of that State.<br />
Other taxes<br />
There is no inheritance or gift tax in the Slovak Republic.<br />
However, if Notes are donated by an employer to a Slovak tax resident who is an employee,<br />
or if Notes are donated to a Slovak tax resident who is self-employed and these Notes are<br />
donated in connection with the carrying out of this self-employment, the value of the gift is<br />
subject to Slovak income tax and related health insurance contributions. As of January 1,<br />
2011 the value of gift is also subject to the Slovak social insurance contributions since the<br />
assessment base for social insurance purposes generally follows the tax base of the<br />
individual (employee or self-employed person), although some exemptions may apply.<br />
No other taxes are levied in the Slovak Republic on the acquisition, sale or other disposal of<br />
the Notes by residents.<br />
Page 88
OFFER AND SUBSCRIPTION<br />
The Programme provides for permanent and/or repeated issues of Notes. In case of tap<br />
issues (defined as such in the Final Terms) the offer period largely equals the term and the<br />
issue price may be adjusted from time to time. The Issuer may also set out a subscription<br />
period in the Final Terms and may shorten or extend it.<br />
The invitation to make offers towards purchaser of the Notes is made by the Issuer and/or<br />
distribution partners, if any. The offer to subscribe for Notes is to be made by the investors.<br />
The Issuer retains the right to accept or reject subscription offers (in whole or in part).<br />
Proceedings for a reduction of the allocation and for refunding of amounts are in general not<br />
applicable. Die Issuer retains the right in individual cases to reduce the allocation of<br />
subscribed Notes and to refund the subscription amounts.<br />
The denomination of the Notes and/or minimum or maximum subscription amounts (if such<br />
are applicable) are set out in the Final Terms.<br />
The payment of the subscription price and the delivery of the Notes are effected on the basis<br />
of a subscription agreement concerning the acquisition of the respective Notes to be<br />
concluded between the investor and the Issuer and/or distribution partners, if any.<br />
The results of the offer of Notes will be disclosed by the Issuer at the end of the respective<br />
applicable subscription period (see point 27 of the Final Terms), which means that (i) in case<br />
of a single issue on or around the Issue Date, or (ii) in case of tap issue immediately after the<br />
end of the offer, to the Oesterreichische Kontrollbank AG as central securities depositary of<br />
the Notes.<br />
Proceedings for exercising preferential rights, the transferability of subscription rights and<br />
treating of not exercised subscription rights shall not apply.<br />
The Notes shall primarily be offered to retail customers. In general however, the invitation to<br />
make an offer for subscription of Notes is not made to a restricted group of investors.<br />
Therefore, no different categories of investors exist to whom the Notes may be offered.<br />
The subscribers will be informed of the allocated amount of Notes by credits of the Notes to<br />
their securities accounts. It is not possible to start trading in the Notes on a regulated market<br />
before the allocation of Notes.<br />
The issue price and the aggregate nominal amount of the Notes will be fixed by the Issuer at<br />
the beginning of the offer and are set out in the Final Terms. In case the issue and/or the<br />
aggregate nominal amount for a specific tranche is not fixed at the issue date, the Final<br />
Terms will set out the proceeding for the calculation and publication of such information.<br />
In case of tap issues the issue price will be adjusted by the Issuer by taking into account<br />
several price-relevant factors as e.g. the current interest rate and other product-specific<br />
criteria according to market conditions prevailing from time to time. The aggregate principal<br />
amount may increase from time to time upon subscriptions being made. The Issuer will<br />
specify in such case an upper limit for the aggregate principal amount of the Notes in the<br />
Final Terms.<br />
Additionally, the issue price may include an issue premium (in such case set out in the Terms<br />
and Conditions of the Notes and/or the Final Terms) which is intended to cover commissions<br />
for the Issuer or other ancillary costs arising in connection with the issue and hedging of the<br />
respective Notes. Costs, taxes and disbursements incurred by the investor in connection with<br />
a secondary purchase of the Notes are outside of the influence of the Issuer.<br />
Page 89
The <strong>ERSTE</strong> Foundation has appointed the Erste Group Bank to act as arranger and dealer in<br />
accordance with the Framework Agreement dated 22 March 2010, as amended on or about 6<br />
December 2011. The Erste Group Bank will be acting as coordinator and/or placer for the<br />
Issuer in connection with the issuance of the Notes, unless stated otherwise in the Final<br />
Terms. All co-ordinators and/or placers appointed in the future will be set out in the Final<br />
Terms.<br />
The Notes may be distributed in accordance with the Final Terms with a firm commitment, or<br />
on the basis of a "best efforts arrangement" or in any other way. In case a subscription<br />
agreement has been concluded, the date of this will be disclosed in the Final Terms.<br />
Currently, no intermediaries acting in secondary trading have been appointed by the Issuer.<br />
Any intermediaries appointed will be set out in the Final Terms.<br />
Page 90
SELLING RESTRICTIONS<br />
This Prospectus may not be published in any country in which regulations for the registration,<br />
admission or other provisions in connection with a public offer exists or may exist, which could<br />
be against the publication or an offer of the Notes. In particular, the Prospectus may not be<br />
brought into the United States of America.<br />
The Notes issued under this Prospectus by the Issuer have not been and will not be<br />
registered under the United States Securities Act of 1933 and may include Notes in bearer<br />
form that are subject to US tax law requirements. Subject to certain exceptions, notes may<br />
not be offered, sold or delivered within the United States or to US persons. (as defined by the<br />
applicable rules).<br />
Public offerings of the Notes may be made in Luxembourg, the Czech Republic and the<br />
Slovak Republic or any other country where the Prospectus has been successfully notified to<br />
(each an "Offer Jurisdiction"). The Notes may not be offered publicly in any other Member<br />
State of the European Economic Area which has implemented the Prospectus Directive,<br />
except to the extent that the offer will be made pursuant to an exemption under Article 3 of the<br />
Prospectus Directive from the requirement to publish a prospectus by the Issuer.<br />
"Public offering" of the Notes in an Offer Jurisdiction which is a Member State of the<br />
European Economic Area means a communication to the general public in any form<br />
whatsoever that contains adequate information on the terms and conditions of an offering or<br />
an invitation to subscribe for securities, and on the securities themselves that gives potential<br />
investors a basis on which to reach an informed decision on the purchase or subscription to<br />
securities, provided that deviations from this definition under national implementation<br />
provisions shall be included by the definition.<br />
Page 91
GENERAL INFORMATION<br />
(1) The Issuer is not aware of any conflicts – including interest conflicts – which would<br />
have a material effect on the issuance / offer of the Notes, except as specified in the<br />
Final Terms.<br />
(2) The establishment of the Programme was authorised by a resolution of the Managing<br />
Board of the Issuer passed on 11 October 2010. Single issuances under the<br />
Programme will be issued on the basis of separate resolution of the Managing Board<br />
made in coordination with the Supervisory Board.<br />
(3) Except as disclosed under "Recent developments" in the Prospectus, there has been<br />
no significant change in the financial or trading position of the Issuer since 30<br />
September 2011 and no material adverse change in the prospects of the Issuer since<br />
31 December 2010.<br />
(4) No governmental, legal or arbitration proceedings (including any such proceedings<br />
which are pending or threatened of which the Issuer is aware), during a period of<br />
twelve months preceding the date of this Prospectus, may have or have had in the<br />
recent past, significant effects on the Issuer and/or the Erste Group's financial<br />
position or profitability.<br />
(5) The Securities Code and the Securities Identification Number (ISIN) for each Series<br />
of Notes will be set out in the Final Terms.<br />
(6) The address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium,<br />
the address of Clearstream, Luxembourg is 42 Avenue JF Kennedy L-1855<br />
Luxembourg and the address of Oesterreichische Kontrollbank AG is Am Hof 4, A-<br />
1011 Vienna. The address of any alternative clearing system will be specified in the<br />
applicable Final Terms.<br />
(7) Copies of the latest financial statements and interim financial statements dated 30<br />
September 2010 of the Issuer may be obtained, and copies of the Prospectus<br />
(including supplements) and any Final Terms of a respective Series will be available<br />
for inspection at the registered office of the Issuer and at the specified office of the<br />
Paying Agent during normal business hours as long as any of the Notes of the<br />
respective Series are outstanding.<br />
(8) Die <strong>Spar</strong>kassen-Prüfungsverband Prüfungsstelle (statutory auditor, two current<br />
directors of which are members of the Austrian Institute of Auditors) of<br />
Grimmelshausengasse 1, A-1030 Vienna has audited and rendered unqualified audit<br />
reports on the financial statements of the Issuer for the years ended on 31 December<br />
2009 (dated 22 March 2010) and the year ended 31 December 2010 (dated 14 April<br />
2011).<br />
(9) The holders of the Notes will be represented in any judicial action or bankruptcy<br />
proceedings instituted in Austria against the Issuer by an attorney (curator) appointed<br />
by and responsible to the Commercial Court of Vienna under the statute of 24 April<br />
1874, Imperial Legislation Gazette no. 49 as amended (Kuratorengesetz).<br />
(10) For so long as Notes may be issued pursuant to this Prospectus, the following<br />
documents are available, during usual business hours on any weekday (Saturdays<br />
and public holidays excluded), for inspection at the registered office of the Issuer and<br />
the specified office of the Paying Agent:<br />
(i) Foundation Statutes (<strong>Stiftung</strong>serklärung) of the Issuer dated 10 December<br />
2008;<br />
Page 92
(ii) the published annual report and audited financial statements of the Issuer for<br />
the two most recent financial years ended prior to the date of this Prospectus<br />
and any subsequent interim financial statements of the Issuer; and<br />
(iii) a copy of this Prospectus.<br />
(11) Electronic versions of the following documents will be available on the website of the<br />
Issuer under "www.erstestiftung.org" and on the website of the Luxembourg Stock<br />
Exchange under "www.bourse.lu":<br />
(i) a copy of this Prospectus; and<br />
(ii) English translations of the audited financial statements of the Issuer for the<br />
financial years ended 31 December 2009 and 31 December 2010 and the<br />
unaudited interim financial statements of the Issuer for the third quarter<br />
ended 30 September 2011.<br />
Page 93
GLOSSARY AND LIST OF ABBREVIATIONS<br />
For ease of reference, the glossary below sets out certain abbreviations and meanings of certain<br />
terms used in the Prospectus. Readers of the Prospectus should always have regard to the full<br />
description of a term contained in the Prospectus.<br />
2010 PD Amending<br />
Directive<br />
means the Directive 2010/73/EC of the European Parliament and<br />
the Council of 24 November 2010<br />
Austrian Banking Act The Austrian Banking Act 1993 as amended (Bankwesengesetz)<br />
CEE Central Eastern Europe<br />
Clearstream Clearstream Banking S.A.<br />
Companies Register The Austrian companies register (Firmenbuch) at the Vienna<br />
Commercial Court (Handelsgericht)<br />
CSSF means the Luxembourg Financial Sector Supervisory<br />
Commission (Commission de Surveillance du Secteur Financier),<br />
the competent authority in Luxembourg for approving<br />
prospectuses<br />
EEA European Economic Area<br />
Erste Group means the Erste Group Bank, together with its subsidiaries and<br />
associated companies<br />
Erste Group Bank Erste Group Bank AG, the ultimate parent company of Erste<br />
Group, registered in the Companies Register under FN 33209m<br />
<strong>ERSTE</strong> Foundation <strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung<br />
EUR Euro<br />
EURIBOR The Euro Inter-bank Offered Rate<br />
Euroclear Euroclear Bank S.A./N.V.<br />
Euro-Zone The region comprising those member states of the EU that have<br />
adopted the single currency in accordance with the Treaty<br />
establishing the European Community (signed in Rome on 25<br />
March 1957), as amended by the Treaty on the EU (signed in<br />
Maastricht on 7 February 1992) and the Amsterdam Treaty of 2<br />
October 1997, as further amended from time to time<br />
Fixed Rate Notes Notes on which interest is fixed during the term of the Note.<br />
Floating Rate Notes Notes on which interest is payable with a variable coupon, and<br />
which are redeemed at par.<br />
Haftungsverbund The guarantee system that was formed on the basis of a set of<br />
agreements with the majority of the Austrian savings banks<br />
ICMA means the International Capital Markets Association<br />
ISDA means the International Swaps and Derivatives Association, Inc.<br />
Page 94
LIBOR means the London Inter-bank Offered Rate<br />
OeKB Oesterreichische Kontrollbank Aktiengesellschaft,<br />
Am Hof 4; A-1011 Vienna, Austria<br />
Prospectus Directive means the Directive 2003/71/EC of the European Parliament and<br />
the Council of 4 November 2003<br />
Senior Notes Senior Notes constitute direct, unconditional, unsecured and<br />
unsubordinated obligations of the Issuer, save for any obligations<br />
required to be preferred by law.<br />
Supervisory Board means the supervisory board (Aufsichtsrat) of the Issuer<br />
Zero Coupon Notes Zero Coupon Notes are Notes which do not include any coupon.<br />
The difference between the redemption price and the issue price<br />
constitutes the yield, in lieu of periodic interest payments.<br />
Therefore, the investor receives only one payment: the sales<br />
proceeds of a sale prior to maturity or the redemption amount at<br />
maturity.<br />
Page 95
ISSUER<br />
<strong>DIE</strong> <strong>ERSTE</strong> <strong>österreichische</strong> <strong>Spar</strong>-<strong>Casse</strong> Privatstiftung<br />
Friedrichstraße 10<br />
A-1010 Vienna<br />
Austria<br />
ARRANGER AND DEALER<br />
Erste Group Bank AG<br />
Graben 21<br />
A-1010 Vienna<br />
Austria<br />
PAYING AGENT AND CALCULATION AGENT<br />
Erste Group Bank AG<br />
Graben 21<br />
A-1010 Vienna<br />
Austria<br />
AUDITOR<br />
<strong>Spar</strong>kassen-Prüfungsverband Prüfungsstelle<br />
Grimmelshausengasse 1<br />
A-1030 Vienna<br />
Austria<br />
LEGAL ADVISOR<br />
WOLF THEISS<br />
Rechtsanwälte GmbH<br />
Schubertring 6<br />
A-1010 Vienna<br />
Austria